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Will Hertz Global Thrive Under New CFO Jackson's Leadership?

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Hertz Global Holdings, Inc. HTZ named Jamere Jackson as its new chief financial officer, following the resignation of incumbent Thomas C. Kennedy. Notably, Kennedy had been serving the company for more than four years.

Jackson will assume his responsibilities from Sep 10. He will be in charge of all financial operations at this car rental company. His responsibilities include the supervision of financial planning and analysis, accounting and financial reporting, risk management among other things. In the interim period (up till Sep 10), Robin Kramer, the company’s senior vice president and chief accounting officer will be the acting CFO.

However, Jackson’s appointment failed to find favor with investors as the stock declined more than 3% in after-market trading on Aug 20, following the news.

In fact, Hertz Global’s disappointing price performance is not limited to Aug 20 only. Shares of the company have underperformed its industry on a year-to-date basis. While the stock has shed 4.4% of its value, the industry rallied 5.2%.

 

 

Reasons for the Disappointing Price Performance

Hertz Global, which competes with the likes of Avis Budget Group, Inc. CAR in the rental car industry, is investing heavily in its turnaround plan. This, in turn, is hurting the company’s bottom line significantly. In the second quarter of 2018, U.S. Rental Car direct vehicle operating and selling, general and administrative costs (as a % of total segmental revenues) increased to 70% from 67% a year ago.

Due to this elevated level of investment spending, the bottom line is expected to remain under pressure in the remainder of 2018. Moreover, pricing pressure remains a major headwind on low used car prices. The company’s significant debt burden coupled with dwindling cash flows  further remains a cause for concern.

Also, the presence of private players like Uber and Lyft is a major threat as far as the need for car rental is concerned. Structural issues with the car rental model are worrisome as well. Naturally, the fleets of companies like Hertz Global are oversaturated. Intense competition from players like Uber in addition to other car-sharing and ride-hailing services is too hurting the company’s top-line growth prospects.

Coming back to the news of Jacksons’ appointment, it should be noted that he has a vast experience in the financial field. Prior to Hertz Global, Jackson had served Nielsen Holdings plc as its CFO. Also, he worked with companies like Yum! Brands, Inc. YUM. Given his vast experience, Hertz Global expects the appointment of Jackson to be a successful step toward its efforts to revive itself.

Zacks Rank &  Key Pick

Hertz Global carries a Zacks Rank #3 (Hold). A better-ranked stock in the broader Transportation Sector is CSX Corporation CSX sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of CSX Corporation have gained 34.1% in the last six months.

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