Leading vehicle rental service provider, Avis Budget Group Inc. CAR has been riding on its expansion strategies which are progressing in full swing via alliances, acquisitions and joint ventures.
Some of the recent ventures to expand globally include Avis’ multiyear preferred partnership deal with JetBlue Airways and Southwest Airlines; becoming the Official Rental Partner of Pebble Beach Resorts; expansion of Zipcar to Wilmington and Ottawa; strengthening its Asian footprint; and acquisition of Italy-based Maggiore.
We also commend Avis’ focus on expanding its Budget brand, taking its multi-brand strategy to the next level by acquiring its Budget Car Rental licensees at various locations. Moreover, sustained productivity growth, implementation of pricing initiatives and potential revenue-generating synergies from various acquisitions, bode well.
In this regard, the company has acquired Budget licensees in Brazil, Southern Africa, Southern California and Las Vegas in the U.S., Norway, Sweden and Denmark in Scandinavia; and Edmonton in Alberta, Canada.
Further, we see strong U.S. demand trends for Avis Budget as travel volumes continue to rise. Envisioning strong travel trends among leisure and commercial travelers as well as sustained expansion of these trends, we believe the acquisition of the renowned Maggiore and purchase of other licensees will enhance Avis Budget’s operational foothold in global markets.
Moreover, the company remains focused on fortifying its fleet with the addition of latest car models from leading manufactures in order to attract customers. We believe that these strategies, along with better customer support systems, position the company for top-line growth.
However, Avis Budget is witnessing declining revenues owing to adverse currency movements, as evident from its second-quarter 2015 results, wherein the bottom line surpassed expectations while the top line lagged the same. Consequently, the company lowered its revenue, adjusted EBITDA and earnings forecast for 2015 as it expects the unfavorable currency environment to continue to weigh on results.
Nevertheless, Avis, which competes with Hertz Global Holdings Inc. HTZ, United Rentals Inc. URI and Rent-A-Center Inc. RCII, has been persistently implementing its disciplined pricing initiatives and expects these to offset the rising fleet costs. The company noted an improvement in pricing comparisons in the Americas by the end of the second quarter and anticipates this pattern to continue in the second half of 2015. However, we would prefer to wait for more pronounced results on this front before turning optimistic.
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