A month has gone by since the last earnings report for Hertz (HTZ). Shares have lost about 5.6% 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 Q3
The company's earnings (excluding 34 cents from non-recurring items) of $1.60 surpassed the Zacks Consensus Estimate by 12 cents. However, quarterly earnings declined from the year-ago figure. Moreover, quarterly revenues of $2,836 million were marginally short of the Zacks Consensus Estimate of $2,876.9 million. However, the top line improved 2.8% year over year driven by impressive performance of the U.S. Rental Car segment.
In the quarter under review, the U.S. Rental Car segment generated revenues of $1,962 million, up 5.9% year over year. This upside can be attributed to favorable pricing and upbeat demand.
Vehicle utilization decreased to 79% from 81% a year ago. Transaction days improved 5% year over year on the back of robust demand from summer leisure renters and ride-hailing drivers. Total revenue per transaction day (RPD) inched up 1%. Adjusted EBITDA for the segment were up 29% year over year to $269 million, but short of the Zacks Consensus Estimate of $308 million.
Segmental direct vehicle operating expenses inched up 2.9% to $1,099 million. Meanwhile, interest expenses increased 12.8% while selling, general and administrative expenses declined 2.3% year over year.
The International Rental Car segment generated revenues of $702 million, down 4% year over year. The downside was due to decreased volumes as a result of weakness in the European market. Meanwhile, segmental revenues were flat on a constant currency basis. Vehicle utilization was flat at 80%. Segmental RPD inched up 1%.
Segmental direct vehicle operating costs increased marginally year over year to $386 million. Meanwhile, interest expenses were flat while selling, general and administrative expenses declined 7.5% year over year. Adjusted EBITDA for the segment not only declined 18% year over year to $115 million, but also fell short of the Zacks Consensus Estimate of $118 million. Meanwhile, revenues from all other operations dipped 1.1% to $172 million.
Balance Sheet Highlights
The company exited the third quarter with cash and cash equivalents of $465 million compared with $1.13 billion at the end of 2018. Restricted cash and cash equivalents at the end of the period totaled $230 million compared with $283 million at 2018 end. As of Sep 30, 2019, total debt amounted to $18.04 billion compared with $16.32 billion as of Dec 31, 2018.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision flatlined during the past month. The consensus estimate has shifted -5.43% due to these changes.
At this time, Hertz has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile 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.
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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