Avis Budget (CAR) Gains From Its Ability to Serve the Market
Avis Budget CAR is strengthening its global position through diverse mobility offerings and strategic acquisitions. Their portfolio of distinct brands targets specific markets, supported by expanding connected vehicle fleets and ongoing technology improvements for better customer experiences. The company's commitment to shareholder value is evident through share repurchases.
Avis Budget reported mixed second-quarter 2023 results wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same. Adjusted earnings of $11.01 per share beat the consensus estimate by more than 12.5% but plunged 30.9% year over year. Total revenues of $3.12 billion missed the consensus estimate by 2.7% and declined 3.7% year over year.
The company’s shares have grown 20% in the year-to-date period compared with its industry’s 2.3% increase.
Avis Budget Group, Inc. Price
Avis Budget Group, Inc. price | Avis Budget Group, Inc. Quote
Factors in Favor
Avis Budget uses various global brands tailored to specific market segments. Avis serves premium and corporate travelers, Budget targets mid-tier, cost-conscious travelers, Zipcar offers urban mobility, and Payless and Apex cater to budget travelers. The company is also expanding globally with brands like FranceCars, Maggiore, Morini, Turiscar, and ACL Hire to meet diverse mobility needs.
Avis Budget's global expansion and brand presence have been significantly bolstered through a series of strategic acquisitions over the years. However, in 2022, the company did not pursue any acquisition activities. In 2021, Avis Budget successfully completed acquisitions of several licensees in both Europe and North America, with a combined investment of approximately $23 million, in addition to $22 million for acquiring fleet assets. These acquisitions aligned with the company's strategic goal of re-acquiring licensees when it proved advantageous, allowing for the expansion of its portfolio of company-operated locations.
Similarly, in 2020, Avis Budget executed the acquisitions of various licensees in North America and Europe, totaling around $28 million, along with an additional $22 million invested in acquiring fleet assets. These acquisitions were in line with the company's strategy to selectively re-acquire licensees when favorable, facilitating the growth of its network of company-operated locations.
Avis Budget is dedicated to enhancing its technology and customer experience. The company simplifies online interactions, making reservations, pick-ups, and returns user-friendly. Partnerships with Alphabet and Amazon enable voice-controlled access via Google Assistant and Amazon Alexa devices. The focus extends to expanding the fleet of connected vehicles, managed through the Avis mobile app, streamlining operations, reducing costs, and enabling real-time inventory tracking, mileage monitoring, and automated maintenance alerts. The data generated by these vehicles, including road conditions, accident zones, weather, and user preferences, could become a valuable asset, with potential for future monetization. Avis Budget remains committed to innovation and customer convenience.
Avis Budget has consistently demonstrated its commitment to rewarding shareholders through significant share repurchase initiatives. In the years 2022, 2021, and 2020, the company repurchased shares amounting to $3.33 billion, $1.46 billion, and $119 million, respectively. These strategic actions not only reflect the company's strong belief in its business prospects but also serve to boost investor confidence in the stock by positively influencing earnings per share.
Avis Budget's current ratio at the end of second-quarter 2023 was pegged at 0.79, higher than the current ratio of 0.72 reported at the end of first-quarter 2023.
Key Risks
The vehicle rental industry is highly competitive, marked by intense price and service competition involving global, local, and regional competitors. Key competitive factors include pricing, customer service quality (including booking system usability and rental processes), vehicle availability and reliability, rental locations, product innovation, and distribution networks on a national and international scale.
Avis Budget's primary competitors in vehicle rental operations include Enterprise Holdings, Inc. (Enterprise, National, and Alamo brands), Hertz Global Holdings, Inc. (Hertz, Dollar, and Thrifty brands), Europcar Mobility Group (Europcar, Goldcar, InterRent, Buchbinder, Fox Rent A Car, and Ubeeqo brands), and Sixt SE. The company also faces competition from smaller local and regional rental companies for market share and competes with ride-hailing firms, particularly for short urban trips.
Avis Budget generates 21% of its revenues from its international segment, making it susceptible to fluctuations in foreign currency exchange rates. The company has operations in North America, Europe, Australia and Asia, and various other regions, and it operates in collaboration with licensees in approximately 180 countries globally. In 2022, the company's international revenues were adversely affected by $310 million due to shifts in currency exchange rates, contributing to a total negative impact of $327 million from foreign currency fluctuations.
Zacks Rank and Stocks to Consider
CAR carries a Zacks Rank #3 (Hold). Here are some better-ranked stocks from the Business Services sector, which may be considered by investors:
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It beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 27.1%. The consensus estimate for fiscal 2024 revenues and earnings indicates growth of 8.1% and 24.1%, respectively.
Automatic Data ADP currently has a Zacks Rank of 2. The company beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 3.1%. The consensus estimate for fiscal 2023 revenues and earnings implies growth of 6.3% and 11.1%, respectively.
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