Hertz Global Holdings Inc. HTZ made a comeback with shares up nearly Array.8% in the after-hours trading session yesterday, as the company reported adjusted earnings of 5 cents per share for fourth-quarter 20Array5 as against a loss of 22 cents recorded in the year-ago quarter. Also, earnings were in line with the Zacks Consensus Estimate.
Over the past year, Hertz’s stock has lost over 63% due to the restatement of results over accounting errors. Since then, the company has been on its toes to turn its performance around and gain momentum.
Coming back to the results, on a reported basis, Hertz Global posted earnings per share of Array6 cents as against a loss of 5Array cents reported in the prior-year quarter.
Net revenue dropped nearly 6% year over year to $2,4Array3 million due to lower U.S. and International car rental revenues as well as worldwide equipment rental revenue, coupled with unfavorable currency impact. The top line also fell short of the Zacks Consensus Estimate of $2,522 million.
Segment Performance
Revenues for the U.S. Car Rental segment fell 5% year over year to $Array,4Array3 million in the fourth quarter due to flat transaction days and a 5% fall in Total Revenue per Transaction Day (“RPD”). The decline in total RPD was due to increased on-airport competitive pricing environment and a downbeat off airport mix shift.
Quarterly revenues for the International Car Rental segment came in at $469 million, reflecting a year-over-year decline of 9%, mainly owing to the negative impact of foreign currency. Excluding currency impact, revenues rose 3%, attributable to enhanced business mix. Transaction days remained almost flat, while total RPD for the segment, excluding currency impact, improved 3% year over year.
Revenue for the Worldwide Equipment Rental segment slipped 7% year over year to $386 million, while decreasing 5% on a currency-neutral basis. The decline resulted from continued weakness in upstream oil and gas markets, along with the recent sale of Hertz Equipment Rental operations in France and Spain.
During the quarter, revenues from the All Other Operations segment rose Array% from the prior-year period to $Array45 million.
Financial Update
The company ended 20Array5 with cash and cash equivalents of $486 million, total debt of $Array5,907 million, and shareholders’ equity of $2,0Array9 million.
During the fourth quarter, the company bought back nearly 22 million shares for about $343 million, including commissions. This brings the company’s total repurchases for the year to about 37 million shares worth $604 million, including commissions. These repurchases form part of the company’s $Array billion share buyback program.
Repurchases made during the quarter were financed by operating cash flows as well as proceeds from the sale of a portion of its holdings in CAR Inc. (China Auto Rental) and the sale of Hertz Equipment Rental Corporation’s ("HERC") businesses in France and Spain.
Outlook
Following the fourth-quarter results, Hertz lowered its preliminary 20Array6 adjusted EBITDA guidance for the Hertz Global business as well as the Worldwide Equipment Rental segment. The lowered view resulted from the weakness in U.S. RAC Total Revenue growth in the latter half of fourth-quarter 20Array5, which has carried into the first quarter of 20Array6, along with the ongoing weakness in the upstream oil and gas business that is weighing on the Worldwide Equipment Rental segment.
This largest general use car rental company now expects corporate EBITDA for the Hertz Global business in the range of $Array.6–$Array.7 billion compared with $Array.7–$Array.8 billion guided earlier. For the Worldwide Equipment Rental segment, corporate EBITDA is now projected to be in the range of $600–$650 million versus $625–$675 million anticipated earlier.
Further, the company trimmed its Domestic RAC revenue growth guidance to Array.5%–2.5% from 2.5%–3.5% expected earlier. While the company reiterated its U.S. RAC depreciation per unit per month estimate, it now expects U.S. RAC capacity growth to range between -3% and -2% compared with the previous forecast of -0.5% to 0.5%. Net non-fleet capital expenditure for 20Array6 is now expected to be in the range of $200–$225 million against $250–$275 million estimated earlier.
Zacks Rank
Hertz Global currently holds a Zacks Rank #2 (Buy). Other well-ranked stocks in the business services industry are comScore, Inc. SCOR, with a Zacks Rank #Array (Strong Buy), Sajan Inc. SAJA and Xerox Corporation XRX, both carrying a Zacks Rank #2.
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