Avis Budget Group Inc. (CAR) reported its fourth quarter and fiscal 2011 earnings results. For the reported quarter, the company posted loss per share of 14 cents, missing the Zacks Consensus Estimate of earnings per share of 6 cents and comparing unfavorably to the year-ago loss of 6 cents per share.
However, Avis Budget’s earnings per share for full-year 2011 came in at $1.65, up 83% from 90 cents earned in the year-ago period. Earnings for the year, however, missed the Zacks Consensus Estimate of $1.82 per share.
On a reported basis, including one-time items, the company reported loss per share of $1.62 in the fourth quarter 2011 compared with a loss of 23 cents reported in the 2010 fourth quarter. For fiscal 2011, reported loss per share was 28 cents compared with earnings per share of 49 cents reported in fiscal 2010.
In the fourth quarter, Avis Budget registered a 33% jump in net revenues to $1,630 million from $1,226 million in the year-ago quarter. Quarterly revenue, however, fell short of the Zacks Consensus Estimate of $1,676 million. The year-over-year increase came mainly from a 32% rise in rental day volume and a 2% decline in pricing. Excluding the recently acquired Avis Europe, revenue increased 4%, with rental volume growing 5% while prices still down 2%. Ancillary revenues’ growth of 8%, excluding Avis Europe, also contributed to the revenue increase.
Full year revenue at Avis Budget reached $5,900 million, up 14% from last year. However, the company’s yearly revenue failed to meet the Zacks Consensus Estimate of $5,925 million. Excluding Avis Europe, full-year revenue increased 7% on the back of a 6% spike in volume, partially offset by a 1% decline in prices.
By segment, NOrth American car rental revenue rose 3% to $1,011 million in the fourth quarter primarily attributable to a 5% volume expansion, offset by a 3% decline in prices. International car rental revenue came in at $532 million, a whopping rise of 239% year over year, benefiting mainly from the Avis Europe acquisition. Revenue at Truck rental inched up 1% to $86 million, witnessing a 3% rise in pricing.
Avis Budget’s adjusted EBITDA for the fourth quarter and full-year 2011 increased 19% and 49% to $64 million and $610 million, respectively. Adjusted EBITDA margin for the fourth quarter contracted 50 basis points to 3.9%, while full-year margins expanded 240 basis points to 10.3%. This expansion in full-year margins is attributable to double-digit growth in adjusted EBITDA witnessed across all three Avis segments.
Avis Budget ended 2011 with cash and cash equivalents of $534 million and total corporate debt of $3,205 million.
Looking Ahead
In 2012, Avis Budget expects domestic fleet costs to rise to the tune of 15%-20%, on a per-unit basis, as residual values have returned to levels similar to what prevailed before the Japan earthquake in first quarter 2011. The company’s non-vehicle depreciation and amortization costs are expected to be about $125 million in 2012. The company’s effective tax rate in 2012 is expected to be in the range of 34%-38%, on adjusted basis.
Avis Budget is continuing with its efforts to reduce costs while enhancing productivity through its Performance Excellence initiative and five-point cost-reduction and efficiency improvement plan. The company expects its cost-saving initiatives to provide incremental savings of over $45.0 million in 2012.
Further, Avis Budget pointed out that it is on track with its integration plans for Avis Europe, acquired on October 3, 2011, and expects its 2012 results to gain substantially from the integration-related synergies coupled with its strategic initiatives. Annual synergies from the Avis Europe acquisition are expected to be over $35 million, within the first anniversary of the acquisition.
Avis Budget Group is the leading general-use vehicle rental company in North America, Australia and New Zealand. Moreover, a formidable network of more than 10,000 rental locations and 350,000 vehicles enable the company to strengthen its well-established position in a highly competitive vehicle rental industry.
The company faces intense competition from other established players, such as Hertz Global Holdings Inc. (HTZ), Enterprise Rent-A-Car, Dollar Thrifty Automotive Group Inc. (DTG) and Ryder System Inc. (R).
Avis Budget maintains a Zacks #1 Rank, which translates into a short-term ‘Strong Buy’ rating. Our long recommendation on the stock is ‘Outperform’.
AVIS BUDGET GRP (CAR): Free Stock Analysis Report
DOLLAR THRIFTY (DTG): Free Stock Analysis Report
HERTZ GLBL HLDG (HTZ): Free Stock Analysis Report
RYDER SYS (R): Free Stock Analysis Report
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