The analysts covering Hertz Global Holdings, Inc. (NYSE:HTZ) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.
Following the latest downgrade, the six analysts covering Hertz Global Holdings provided consensus estimates of US$8.7b revenue in 2020, which would reflect a definite 11% decline on its sales over the past 12 months. Before the latest update, the analysts were foreseeing US$10.0b of revenue in 2020. It looks like forecasts have become a fair bit less optimistic on Hertz Global Holdings, given the measurable cut to revenue estimates.
The consensus price target fell 12% to US$13.67, with the analysts clearly less optimistic about Hertz Global Holdings' valuation following this update. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Hertz Global Holdings, with the most bullish analyst valuing it at US$38.00 and the most bearish at US$5.00 per share. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. One more thing stood out to us about these estimates, and it's the idea that Hertz Global Holdings'decline is expected to accelerate, with revenues forecast to fall 11% next year, topping off a historical decline of 0.1% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 5.2% per year. So it's pretty clear that, while it does have declining revenues, the analysts also expect Hertz Global Holdings to suffer worse than the wider industry.
The Bottom Line
The clear low-light was that analysts slashing their revenue forecasts for Hertz Global Holdings this year. They're also anticipating slower revenue growth than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of Hertz Global Holdings' future valuation. Given the stark change in sentiment, we'd understand if investors became more cautious on Hertz Global Holdings after today.
Need some more information? We have estimates for Hertz Global Holdings from its six analysts out until 2022, and you can see them free on our platform here.
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