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Hertz Global (HTZ) Gains on Narrower-Than-Expected Q4 Loss

Zacks Equity Research

Hertz Global Holdings HTZ reported better-than-expected results in the fourth quarter of 2018. Following the quarterly results, shares of the company gained significantly in after-market trading on Feb 25.

The company incurred adjusted loss of 55 cents per share in the reported quarter, narrower than the Zacks Consensus Estimate of a loss of 82 cents. Moreover, the amount of loss decreased on a year-over-year basis.
Quarterly revenues came in at $2.29 billion, outpacing the Zacks Consensus Estimate of $2.18 billion and improved 10% on a year-over-year basis. Impressive performance of the U.S. Rental Car segment dove the top line.

Segmental Performance

In the quarter under review, the U.S. Rental Car segment generated revenues of $1.58 billion, up 10% year over year. The upside can be attributed to increased volumes and pricing both on and off airport.
Vehicle utilization improved 10 basis points to 81% on the back of efficient fleet management. Excluding fleet dedicated to transportation network companies ("TNC") rentals, revenues increased 7%. In fourth-quarter 2018, direct vehicle operating and selling, general and administrative costs (as a % of total segmental revenues) increased to 71% from 70% a year ago.

The International Rental Car segment generated revenues of $487 million, flat year over year. Segmental revenues climbed 4% excluding foreign currency impact. Total revenue per transaction day (RPD) remained unaltered year over year.

Segmental direct vehicle operating and selling, general and administrative costs (as a % of total segmental revenues) declined to 74% from 75% a year ago. Revenues from all other operations surged 39% to $232 million.

Balance Sheet and Cash Flow

Hertz Global exited the fourth quarter with cash and cash equivalents of $1.13 billion compared with $1,072 million at the end of 2017. Restricted cash at the end of the quarter totaled $283 million compared with $432 million at the end of 2017.

As of Dec 31, total debt amounted to $16.32 billion compared with $14.86 billion as of Dec 31, 2017. Cash flows provided by operating activities during 2018 totaled $2.56 billion compared with $2.39 billion in the year-ago period.

Zacks Rank & Other Key Picks

Hertz Global carries a Zacks Rank #2 (Buy). Some other top-ranked stocks in the broader Transportation sector are Expeditors International of Washington EXPD, Trinity Industries TRN and Air Lease Corporation AL. While Expeditors and Trinity sport a Zacks Rank #1 (Strong Buy), Air Lease carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Each of the companies has an impressive earnings history. While Air Lease and Expeditors have trumped the Zacks Consensus Estimate in each of the trailing four quarters, Trinity has surpassed the consensus mark in three of the preceding four quarters.

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