2 separate insiders picked up more shares.
Like all of your examples, the proof that UBER / LYFT have lowered rental car pricing is anecdotal. But note: Given how far along we are in the economic expansion, historically by this time, rental cars should be enjoying nice pricing power, but its obvious that isn't happening this cycle. So what has changed? One clear factor is UBER & LYFT. Again, *Anecdotally* they could be hurting pricing by taking a small % of potential renters (ie. at the margin). The jury is still out... Additionally, like you, I do NOT think UBER & LYFT are a existential threat to the rental car industry. *IF* rental co's don't get any pricing power in 2016 given the rising industry related costs & the downsizing of fleets (i.e. the industry is NOT over-fleeted), then its fair to conclude UBER/LYFT are the PRIMARY reason for the industries lack of pricing power - we will see. Either way, with/without pricing power, the #1 priority should be decreasing their cost structure and improving efficiency / utilization, both of which are in their control and happening. Again, I just wish they would speed it up!
Yep, theres a long way to go to get back to those lofty stock prices. I think the stock has gotten so clobbered because 1) its cyclical industry, and there are plenty of fears we are near the end of this economic expansion cycle 2) Used car values have dropped, and there is a glut of used car product coming off lease 3) At this stage in the cycle, HTZ/CAR should have been able to raise prices by now. If they can't in 2016, with higher costs, then its clear to me, that UBER / LYFT as competitors has served to lower pricing across the rental market. 4) the turn around wasnt expected to take until 2018-20 to come to full fruition...Nov 2015 investor meeting was a bit of (negative) surprise to the market (imho)- RE: how long the turn-around will take. However, having said that, the $$ amount Tague / Htz are predicting they can cut from the expense structure dwarfs even the most optimistic analyst view at the time of his arrival... I think they are on the right course, I just wish they would speed it up a year to their "Full Potential" predictions of ~16%+ adj ebitda margins...
I think that mgt sees this and is responding. Operationally, they appear to be doing the right things to position themselves to compete. The first order of business is reducing their cost structure to become the most efficient renter in the business. They are on par with CAR (Avis Budget) RE: Margins, but still need to catch up to Enterprise, the industry leader. In concert with that, the opportunity to improve technology to improve the rental experience is huge. I use the kiosks (where available) when I fly AND rent vehicles, and they are fast and painless, compared to dealing with a line and a slower human customer service rep. I suspect that in the future (next 2 - 3 years) kiosks will take over the rental car industry (I.E. replace many humans at the desk), tied to an APP. They already have the technology, just need to implement it more broadly. Customer service would go up, long lines would go down, and field related employee expenses would go down. Hopefully way down. CAR (Avis) said on latest conference call that field employee expense in the U.S. alone is $750mm. HTZ should be even more, given its larger U.S. footprint, if they could cut 15-20% of expenses off that number while at the same time improving customer service and tie-ing its customer base into using an APP, it would be a vast improvement from where they are now. I believe this is the go forward strategy for both HTZ and CAR.
JMHO, CAR already refi'd ALL of the $550m 2017 corp debt due. Pushed out to 2024. You left out that SRS investment mgt, a tiger cub, owns 22% of the shares outstanding (9.5% of shares + 12.5% through synthetic swap position) and they now have two people on the board. I think/hope they will put pressure (be a catalyst) for getting mgt to more aggressively cut costs? Clearly CAR (and HTZ) are undervalued (unless U#$%$ recession) Though I think Enterprise is best in breed for profit margins, rev growth, AND marketshare, the three most important business / industry metrics. Also, I would rather have the HTZ mgt team then the CAR mgt team, they are shaking things up at HTZ, CAR mgt is steady, but incremental. Again, JMHO.
The CFO for HTZ, Tom Kennedy was CFO for Vanguard Group the parent of Alamo/National when Enterprise acquired them. He then worked for Enterprise during the transition. He stated Enterprise has industry leading Ebitda margins of between 20-22% when he was there - and thats what HTZ will be driving toward when he (and HTZ mgt) gave their 3 year plan in Nov 2015 during their investor day.
And I am long CAR, especially at these prices. If they come anywhere near their FCF guidance for 2016 of $450-$500m its trading 4.0-4.5x FCF. Seems too cheap at these prices, imho. I can only hope SRS lights a fire on them, with their equity AND swaps they own a whopping 22% of CAR stock. They need this to get turned around.
I don't even know who ABG is, and no I don't work for CAR or HTZ. The reason I propose these solutions is bc Enterprise has ebitda margins of ~20% yet CAR is at 10.6% and HTZ is also at 10% but, on it way to 16-18% ebitda by 2018 (goal). Cant win when your competitors are eating your lunch. This is a no-growth business, thus, CAR needs to get more competitive on cost structure.
Move HQ out of NJ - highest cost state in the nation and high state taxes. Break the leases get state money (like HTZ did) to Relocate to FLA, TX or NV. Expedite implementation of technology, especially kiosks at all rental car outlets, cut outlet staff by 20% - while decreasing wait times. Continue to strengthen board, several BoD's add little to no value. Get rid of Larry De Shon who is an incrementalist, with no clear vision of the future. This company needs an overhaul based on creative, out of the box thinking, not his entrenched plan that lacks vision. They are third best out of 3 industry players, but should be focusing and communicating how they will be THE BEST in the industry. I think HTZ is ahead of CAR on rethinking the business, thanks to Icahn's board members, and certainly ahead on cost cutting.
More pricing pressure announced by HTZ today, both stocks hit. Like I said, CAR needs to cut its expenses to get them in line with industry leader, Enterprise. Once all three have similar margins, the price war stops. But for now, Enterprise can "out-discount" both HTZ and CAR b/c they have industry leading cost structure (i.e. they are they low cost producer - econ 101). HTZ understands this and is cutting its costs dramatically, CAR isn't, but needs to, hopefully SRS puts some pressure on CAR mgt.
I had thought HTZ was in the process of winding down that relationship with CAR, since they were aggressively selling off the shares they owned. I saw that HTZ very recently (after I had written CAR to buy CAR;) announced they extended the relationship a few extra years.
Either way, since CAR is the smallest of the 3 in auto rental, I think its most likely they are the target of a buy-out at some point.
in my experience, always redundancies at corporate HQ's. & bring Payless, Zipcar and Avis under one roof. move out of high cost/tax state of NJ like HTZ did, which could probably save $50-$75m.
just a symptom of posting on yahoo mb's. most are mindless. everyone once in awhile you find someone like you, who actually knows something about a company. I still think there are costs to be cut at CAR too.
in no way am i saying they should not improve their IT/analytics. I agree with you on that point. but i also think the additional $50m in capex should have been offset with cuts in other places.
But as of yet, they have no pricing power? Though maybe with the cost inflation, we get some pricing power this year, but analysts and investors have been hoping for that for 3+ years now. I still think that HTZ is the correct model striving for 16-18% ebitda margins through cost cuts, and CAR needs to more aggressively rationalize its expense structure to stay competitive, imho.
Interesting thesis. since we are speculating, what about a buy-out form China Auto Rental,(China's biggest rental co), which allows the combined co to get true global scale? They could still switch the fleet over to Chinese made cars over time.
One potential problem with waiting for "patient money" ie. chinese white night, is that the global economy could go into recession sometime in next few years and a cyclical co like CAR's equity value gets decimated. Thats when the Chinese bidding starts?
I will say, that SRS has accumulated a truly massive position (when you factor in the swaps), which are time sensitive. Management needs to cut costs radically (like HTZ) if they want to set the stage for the co to be acquired, imo. If i was CEO, I'd aggressively rationalize the biz and put the co up for sale, only way to maximize shareholder value at this point in the cycle.
Supor, whats your thoughts on why CAR doesn't publicly endorse a stated cost-cutting plan like HTZ to rigorously rationalize the business and aim toward adj ebitda targets of 16-18% by 2018+/-?
Why wouldn't JGW cut back on its massive marketing budget, wait for other structured settlement co's find customers and then JGW can offer them the best price (given they have the lowest cost of capital)? In other words, JGW can play this game too, and since they have the lowest cost of capital, they will win more times than not.
Why wouldn't a portion of the debt be allocated to the new Hertz Equipment Rental HERC? You don't make any sense.
Lets review what HTZ has already done:
-HTZ has already raised prices to match competitors - this will have a very positive impact on profit margins.
-It has begun / has plans to cut $100mm a year in op expenses.
-Has the most shareholder friendly board (and mgt) its ever had.
-New CEO bought $2mm in stock with his own money at prices ABOVE where it trades today.
-Is undervalued vs its peers.
-Is ready to spin HERC soon (which will be allocated a portion of the debt.
-HTZ should be able to raise at least $3B in cash with HERC spin, which given Tague was handpicked by Icahn (who loves companies that buyback shares) we can assume that the board and Tague will aggressively buyback stock.
- We have an estimate for timing now on the financials - June.
-Some of the absolute best investors are long the stock, including : Icahn, Jana, Glenview, Fir Tree, Tiger, etc, etc.- Many of which have increased their position aggressively based on most recent filings.
- I think Id rather put my on them and their analysis given their history of finding great investments.