It has been about a month since the last earnings report for Hertz (HTZ). Shares have lost about 15.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Hertz due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Earnings Beat at Hertz Global in Q2
Hertz Global's second-quarter 2019 earnings (excluding 34 cents from non-recurring items) of 74 cents handsomely surpassed the Zacks Consensus Estimate of 22 cents. In the year ago quarter, the company incurred a loss. Higher revenues, increased productivity and efficient fleet management benefited results.
Also, quarterly revenues of $2.51 billion came above the Zacks Consensus Estimate of $2.45 billion. Moreover, the top line improved 5.1% on impressive performance of the U.S. Rental Car segment.
In the quarter under review, the U.S. Rental Car segment generated revenues of $1.78 billion, up 10% year over year. This upside can be attributed to higher demand and favorable pricing.
Vehicle utilization increased to 82% from 81% a year ago. In second-quarter 2019 direct vehicle operating expenses inched up 3% to $1.05 billion while selling, general and administrative interest expense was marginally up year over year.
The International Rental Car segment generated revenues of $560 million, down 5% year over year. The downside was due to decreased volumes as a result of weakness in the European market. Meanwhile, segmental revenues were flat excluding foreign currency impact. Total revenue per transaction day (RPD) inched up 1% to $42.97 million.
Segmental direct vehicle operating costs climbed 2.5% year over year to $330 million, while selling, general and administrative interest expense declined 12.7%. Meanwhile, revenues from all other operations dipped 3% to $167 million.
Balance Sheet and Cash Flow
The company exited the second quarter with cash and cash equivalents of $415 million compared with $1.13 billion at the end of 2018. Restricted cash and cash equivalents at the end of the period totaled $239 million compared with $283 million at 2018 end.
As of Jun 30, 2019, total debt amounted to $19.35 billion compared with $16.32 billion as of Dec 31, 2018. Cash flows provided by operating activities at the end of the second quarter totaled $1.05 billion, up from $942 million in the prior-year period.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -25.06% due to these changes.
At this time, Hertz has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Hertz has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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