Avis Budget Group, Inc. (CAR), provider of rental car services, is making significant progress with its various growth strategies.
The company is well on track to expand its operations through alliances, acquisitions and joint ventures. Moreover, in an effort to enhance its global footprint, the company is investing in other growing markets where car rental demand is on the rise. We believe that these strategies, along with better customer support systems, will boost the company’s top line.
Some of the recent ventures to expand globally include the expansion of its Apex brand’s operations to Costa Rica and Cayman Islands, its partnership with Inspirato, the acquisition of Zipcar Inc., its partnership with PortAventura, a popular theme park and resort in Spain, as well as the opening of new car rental units in Spain and the Asia-Pacific.
Also, Avis Budget recently bought the Budget Car Rental licensee for Southern California and Las Vegas. Further, the company had acquired the license for Budget Car & Truck Rental in Edmonton, Alberta, Canada earlier this year and also started directly operating a Budget Car Rental brand in Portugal. We believe that these moves will facilitate Avis Budget to enhance the Budget brand loyalty through better utilization of the licensee’s established presence. This will ultimately boost its top line.
Moreover, we believe that the company’s fundamental drivers, such as sustained productivity growth resulting in better margins, positive volume growth and potential revenue-generating synergies from the Avis Europe acquisition, bode well for its future.
However, Avis Budget lowered its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) and earnings per share guidance ranges for fiscal 2014, reflecting macroeconomic headwinds prevailing in the European market, coupled with unfavorable domestic residual values.
Also, the company lowered its revenue projection to 7% growth for the year, compared to 8%–10% growth projected earlier, owing to soft consumer demand as a result of the ongoing international headwinds. This, in turn, led to downward revisions in the Zacks Consensus Estimate for the fourth quarter, fiscal 2014 and 2015 over the past 60 days.
We also remain cautious as the company is facing the problem of continuously rising North American fleet costs. However, it is adopting better pricing strategies to offset the same. However, this will not be easy owing to the company’s long-term agreements with corporate and cut-throat pricing strategy adopted by its competitors like Hertz Global Holdings, Inc. (HTZ).
Avis Budget currently carries a Zacks Rank #3 (Hold).
Key Picks from the Sector
Better-ranked stocks in the same sector include Core-Mark Holding Company, Inc. (CORE) and WageWorks, Inc. (WAGE), each carrying a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment