We expect the leading global car rental company Avis Budget Group Inc. (CAR) to beat expectations when it reports second-quarter 2014 results after the market closes on Aug 4.
Why a Likely Positive Surprise?
Our proven model shows that Avis Budget may beat earnings because it has the right combination of two key components.
Positive Zacks ESP: Avis Budget currently has an Earnings ESP of +3.18%. This is because the Most Accurate estimate stands at 65 cents per share, while the Zacks Consensus Estimate is pegged at 63 cents.
Zacks Rank #1 (Strong Buy): Note that stocks with a Zacks Rank #1, 2 and 3 have a higher chance of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.
The combination of Avis Budget’s Zacks Rank #1 and Earnings ESP of +3.18% makes us confident of a positive earnings beat.
What's Driving Better-than-Expected Earnings?
We expect Avis Budget to utilize the positivity created following its first-quarter 2014 results, which benefited from strong volume growth and improved pricing for both leisure and commercial travels in North America. Furthermore, the company is gaining from strong contributions made by the recently acquired Zipcar and Payless Car Rental.
As a strategy, the company remains focused on growing its highly profitable customer segments and channels through acquisitions, which are now yielding results. Furthermore, we believe that the company’s prudent investment toward technological advancements will lead to an increase in its customer base and profitability.
Additionally, the company’s encouraging forecasts for 2014 outlook indicate that its top and bottom lines are set for growth in the remaining quarters of 2014. Thus, we await another robust quarterly performance when the company comes up with its second quarter results on Monday.
Avis Budget has topped the Zacks Consensus Estimate in three of the trailing four quarters with an average positive surprise of 30.8%. In the last concluded quarter, the company surpassed the Zacks Consensus Estimate by 100%.
Other Stocks to Consider
Avis Budget is not the only firm looking up this earnings season. The following companies are also likely to beat earnings in the to-be-reported quarter:
Archer Daniels Midland Co. (ADM) has an Earnings ESP of +5.26% and a Zacks Rank #2 (Buy).
Wal-Mart Stores Inc. (WMT) has an Earnings ESP of +2.48% and a Zacks Rank #3 (Hold).
Quicksilver Resources Inc. (KWK) has an Earnings ESP of +14.29% and a Zacks Rank #3.
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