Hertz Cuts Outlook on Weak Volumes

Owing to weak volume trends in its largest business segment, Hertz Global Holdings Inc. (HTZ) lowered its outlook for fiscal 2013. Of late, the company’s Hertz brand in the U.S. airport car rental market has been generating weaker volumes, thereby impacting revenue growth.

Additionally, the deteriorating volumes have resulted in lower fleet utilization as well as lesser demand for the company’s vehicles in the used car market at existing market prices. Nevertheless, the weakness in volume trends is offset by strong pricing trends in the U.S. airport car rental market.

The company now guides revenue for fiscal 2013 in the $10,800.0 – $10,900.0 million range compared with $10,850.0 – $10,950.0 million guided earlier. Adjusted pre-tax income is now expected in the range of $1,200.0 – $1,270.0 million against $1,270.0 – $1,340.0 million projected earlier. However, the company projects adjusted pre-tax income to increase in excess of 30% on a year-over-year basis.

Corporate EBITDA is expected to be about $2,120.0 – $2,190.0 million, down from $2,210.0 – $2,270.0 million guided in February. As a result, the company now forecasts adjusted earnings per share in the range of $1.68 – $1.78, based on 465 million shares. Earlier, the company had projected adjusted earnings per share of $1.78 – $1.88 with about 455 million shares outstanding.

However, the company retained its full-year 2013 projection for corporate cash flow at $500.0 – $600.0 million.

Though the weak volume trends have pulled down the company’s projections for fiscal 2013, it remains optimistic regarding the performance of its other business segments including Hertz car rental off-airport, Dollar Thrifty, Donlen and HERC. Additionally, the company sees tremendous growth prospects in its European car rental business, which has witnessed strong trends throughout 2013, despite the prolonged recession in the market.

Hertz Global currently carries a Zacks Rank #3 (Hold). However, other stocks performing well in the Business Services sector that are worth a look include Cardtronics Inc. (CATM), SouFun Holdings Ltd. (SFUN) and Command Center Inc. (CCNI), all of which carry a Zacks Rank #1 (Strong Buy).

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