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Hertz (HTZ) Q1 Loss Wider Than Expected on Coronavirus Impact

Zacks Equity Research

Hertz Global Holdings HTZ incurred a loss of $1.78 per share in the first quarter of 2020, wider than the Zacks Consensus Estimate of a loss of $1.06. Moreover, the amount of loss increased year over year. Results were significantly affected by decreased demand for rental cars amid coronavirus concerns.

Quarterly revenues of $1,923 million also missed the Zacks Consensus Estimate of $2,029 million. Moreover, the top line declined 8.7% year over year due to weak performance by the U.S. and International Rental Car segments.

Segmental Performance

In the quarter under review, the U.S. Rental Car segment generated revenues of $1,381 million, down 9% year over year. This downside was caused by a decline in transaction days as a result of a dramatic drop in March volumes amid coronavirus-led travel bans and shelter-in-place orders across the United States.

Vehicle utilization declined to 67% from 79% a year ago. Transaction days fell 11% year over year. Total revenue per transaction day (RPD) increased 2%. Adjusted EBITDA for the segment was ($199 million) in the first quarter against $7 million a year ago.

Hertz Global Holdings Inc Price, Consensus and EPS Surprise

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Hertz Global Holdings Inc Price, Consensus and EPS Surprise

Hertz Global Holdings Inc price-consensus-eps-surprise-chart | Hertz Global Holdings Inc Quote

Segmental direct vehicle and operating expenses dropped slightly to $969 million. Meanwhile, interest expenses jumped 21.9%. However, selling, general and administrative expenses declined 4.9% year over year.

The International Rental Car segment generated revenues of $368 million, down 15% year over year due to decreased volumes in March. Segmental revenues fell 12% on a constant-currency basis. Vehicle utilization fell to 66% from 74% in the year-ago quarter. Segmental RPD was flat year over year.

Segmental direct vehicle and operating costs declined 6.7% year over year to $265 million. While interest expenses contracted 9.1%, selling, general and administrative expenses fell 11.1% year over year. Adjusted EBITDA for the segment came in at a loss of $45 million compared with a loss of $13 million in the first quarter of 2019. Meanwhile, revenues from all other operations climbed 13% to $174 million.

Balance Sheet Highlights

The Zacks Rank #4 (Sell) company exited the first quarter with cash and cash equivalents of $1,017 million compared with $865 million at the end of 2019. Restricted cash and cash equivalents at the end of the period came in at $392 million compared with $495 million at 2019-end. As of Mar 31, 2020, total debt amounted to $18.75 billion compared with $17.09 billion as of Dec 31, 2019.

Coronavirus-Led Impact on Finances

According to a SEC filing, the company is doubtful of its ability to meet heavy debt obligations. Hit by the coronavirus-led downturn, the company might not have enough liquidity to meet financial obligations in the next 12 months. Management raised serious concerns over Hertz???s continuity as a going concern.

Performance of Other Transportation Stocks

Within the broader Transportation sector, Westinghouse Air Brake Technologies Corporation, operating as Wabtec Corporation WAB, Alaska Air Group, Inc. ALK and Trinity Industries, Inc. TRN recently reported earnings numbers.

Wabtec, carrying a Zacks Rank #3 (Hold), reported first-quarter 2020 earnings of 97 cents per share (excluding 39 cents from non-recurring items), falling short of the Zacks Consensus Estimate by a couple of cents. Moreover, the bottom line declined 8.5% year over year due to higher operating expenses. Total sales jumped 21.1% year over year to $1,929.9 million but missed the consensus estimate of $2,026.2 million.

Alaska Air, carrying a Zacks Rank #3, incurred a loss of 82 cents per share (excluding $1.05 from non-recurring items) in the first quarter of 2020, narrower than the Zacks Consensus Estimate of a loss of $1.27. In the year-ago quarter, the company reported earnings of 17 cents. The downturn is due to an unprecedented drop in air travel demand in the wake of the coronavirus outbreak. Revenues came in at $1,636 million, missing the Zacks Consensus Estimate of $1,691.1 million. The top line also declined approximately 13% year over year.

Trinity???s first-quarter 2020 earnings of 11 cents per share (excluding $1.22 from non-recurring items) missed the Zacks Consensus Estimate of 14 cents. Moreover, the bottom line plunged 54.2% year over year. However, total revenues of $615.2 million surpassed the Zacks Consensus Estimate of $478.5 million. The top line also inched up 1.7% year over year on higher volume of railcars. The stock carries a Zacks Rank #5 (Strong Sell).

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