Shares of Hertz Global Holdings, Inc. (HTZ) rose 8.2% on the index as the company announced price hikes for all Hertz, Dollar and Thrifty car rentals over the last weekend.
The price rise will be applicable to the cars which have been booked for pick-up on or post Jan 1, 2015. This move was mainly undertaken in response to the rising fleet costs, resulting from higher fleet depreciation, which in turn, stems from lower residual values.
Further, management announced that it intends to implement various cost-cutting measures in order to achieve cost savings, greater than the $100 million annual cost cutting it announced recently.
Hertz had earlier announced to achieve $100 million annual cost savings mainly by reducing its general, administrative and external strategic advisor-related costs, cutting down on its information technology and capital investments, and closing its pension plans. However, now it plans on achieving greater cost savings.
Fleet costs seem to be a prevailing headwind in the car rental industry. Another company which is struggling with rising fleet costs is Avis Budget Group, Inc. (CAR). Avis Budget continues to progress on its disciplined pricing initiatives and expects them to offset persistently rising North American business fleet costs. The similar strategy adopted by Hertz should bring some relief to the company.
Hertz currently carries a Zacks Rank #5 (Strong Sell) as the company recently stated that due to the accounting errors identified in the financial results for 2011, it also needs to restate its financial statements for 2012 and 2013, as the ongoing accounting review will have an impact on them.
Consequently, Hertz stated that due to these accounting activities, it will be unable to file any updated statements before at least mid-2015 and that there is no guarantee of the process being completed by then.
However, with its cost-cutting efforts and expansion programs underway, the company aims to enhance its financial and operational efficiencies, position itself well among competitors, increase consumer satisfaction and maintain its focus on high-return opportunities.
Better-ranked stocks in same the industry include Core-Mark Holding Company, Inc. (CORE) and WageWorks, Inc. (WAGE), each carrying a Zacks Rank #2 (Buy).
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