Hertz Global Holdings, Inc. (HTZ), which continues to grapple with its accounting review owing to the identification of certain errors in its financial results for 2011, retained that it will be unable to file any updated statements before mid-2015. The company also stated that there is no guarantee of the process being completed by then.
Although the errors detected pertain to the company’s 2011 results, Hertz had identified the need to review and restate its financial statements for 2012 and 2013 as well. Progressing with its review, Hertz stated that the cumulative errors identified so far will affect GAAP pre-tax income of 2011, 2012 and 2013 by nearly $51, $74 and $28 million, respectively.
Also, the company remains on track to segregate its equipment rental operations. However, completion of the same will be delayed until the company finishes its accounting review and files the required statements with the SEC.
Simultaneously, Hertz provided an update on its fourth-quarter 2014 results.
Total revenue for the quarter remained almost flat year over year at $2.5 billion. Going by segments, revenues at the U.S. Car Rental segment remained flat year over year at $1.5 billion; the International Car Rental segment’s revenues dropped roughly 5% to $515 million; Worldwide Equipment Rental segment’s revenues climbed 3% to $413 million and revenues for all other operations advanced 6% to $143 million.
Total revenue for full-year 2014 inched up about 2% to $11 billion. Also, the company now envisions its corporate earnings before interest, taxes, depreciation and amortization (“EBITDA”) for 2014 to come on the lower end of its previously announced range of $1.30–$1.45 billion.
Apart from providing financial updates, Hertz also provided an update on its cost curtailment, and revenue and fleet enhancement strategies. Following this, shares of the company inched up 1.9% on the index.
With regard to its cost-cutting initiatives, the company stated that it is focused on reducing inefficiencies and wastage in its organization. In fact, these endeavors encouraged management to target cutting costs by about $200 million annually, as against $100 million expected earlier. Hertz anticipates to achieve savings at a full run rate by 2015-end.
Additionally, the company is in the process of reviewing its revenue execution capacities, which include assessing training plans, organizational talent and leadership, data integrity, performance management and decision support systems. Together, the cost containment and revenue improvement actions are likely to place the company well among competitors by boosting profitability.
Moving to Hertz’s fleet expansion plans, the company has recently announced plans to buy additional fleet and speed up fleet transformation. The company stated that it is going about its fleet capacity enhancement plan in a more disciplined manner by targeting profitable areas. This enabled Hertz to achieve moderate fleet expansion so far in 2015, in comparison with initial plans. This disciplined approach has also made the company confident of completing its fleet transformation a month ahead of the original schedule of mid-2015.
All these efforts highlight the company’s strong commitment toward boosting its performance, as it aims to exploit its full potential. Management believes that it has to solidify its base and make constructive enhancements to its organizational structure to make this possible.
We note that all aforementioned financial updates include the effect of adjustments made with respect to the accounting review and are subject to changes. This is because, being preliminary in nature, these results do not reflect Hertz’s actual potential. However, management expects 2015 to be a transitional year for this Zacks Rank #3 (Hold) company.
Better-ranked stocks in the same industry include Cardtronics Inc. (CATM), ExamWorks Group, Inc. (EXAM) and SPS Commerce, Inc. (SPSC), each carrying a Zacks Rank #2 (Buy).
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