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Hertz Drops 10% on Carl Icahn's Stake Cut: Cause for Worry?

Zacks Equity Research

Shares of Hertz Global Holdings HTZ declined approximately 10% at the close of business on Mar 5, following news of activist investor Carl Icahn’s stake reduction in the company.

Per a CNBC report, Icahn has sold nearly five million shares of the company and now owns 24.3 million shares, representing 28.9% of the company’s outstanding equity. Previously, he owned 29.3 million shares or 35% of the company. Despite the stake reduction, Icahn remains Hertz’s largest stakeholder.

Icahn’s initial investment in the company dates back to 2014 when a chain of accounting errors made the company restate its financial results for several years. During the time, this billionaire investor offered support to the company by reshaping its management team. Since 2014, Icahn has supervised the introduction of two Hertz chief executive officers besides wining board seats.

Given Icahn’s strong involvement in the company, this sudden sale of a major portion of interest is bound make investors pessimistic about the stock.

Hertz’s Performance to Date in 2019

Shares of the company have surged 31.9% on a year-to-date basis compared with the industry’s 11% rise.


 

The company’s recently reported fourth-quarter 2018 results have been impressive with narrower-than-expected loss. Further, the amount of loss decreased on a year-over-year basis. Quarterly revenues also outpaced estimates and improved 10% year over year as well. Encouraging performance of the U.S. Rental Car segment drove such a performance.

The company’s above performance stats certainly signal positivity. Coming to what really caused the company’s largest stakeholder to take a step back is bit of a mystery though.

Zacks Rank & Other Key Picks

Hertz carries a Zacks Rank #2 (Buy). Some other top-ranked stocks in the same space are Azul AZUL, Air China Ltd. AIRYY and SkyWest, Inc. SKYW, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Azul and Air China have rallied more than 77% and 19%, respectively, in the past six months. Meanwhile, the SkyWest stock flaunts impressive commendable earnings history, having topped the Zacks Consensus Estimate in each of the last four reported quarters, the average being 16.9%.

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