Hertz Global Holdings, Inc. (HTZ), Avis Budget Group Inc. (CAR): The Rental Business Beats Owning

Page 1 of 2

What I like about the rental business is that there aren’t a lot of competitors. In the car rental space, you have Hertz Global Holdings, Inc. (NYSE:HTZ), Avis Budget Group Inc. (NASDAQ:CAR), and privately-held Enterprise. In the past decade, the number of competitors has gone from six to three as the industry consolidated. These three companies now control 90% of the market and that gives them tremendous pricing power. Prices for car rentals are now rising, with rentals from Hertz rising 5.3% at airports. As car rental prices increase, that drives the top and bottom lines for the car rental companies.

The rental giant

Hertz Global Holdings, Inc. (NYSE:HTZ)

Hertz Global Holdings, Inc. (NYSE:HTZ) is the rental industry’s largest publicly-traded company. The company’s primary car rental locations are at or near airports in approximately 150 countries. Hertz also has a growing equipment rental business with approximately 340 locations in the U.S., Canada, China, France, Spain and Saudi Arabia. Hertz rents all types of heavy and light equipment for various industries.

The first quarter of this year was a great one for Hertz Global Holdings, Inc. (NYSE:HTZ). Worldwide revenues were up 24.3% in the first quarter. The North American equipment rental business increased 20%. The company’s earnings before interest, taxes, depreciation, and amortization (EBITDA) increased 74.2% year-over-year. Pretax income was $144.5 million compared to $29 million in the prior year’s quarter.

Going forward, Hertz Global Holdings, Inc. (NYSE:HTZ) is targeting Enterprise’s off-airport business. Enterprise’s locations are primarily in neighborhoods and rental times are typically longer. Hertz has about 2,600 neighborhood locations now, compared to about 5,500 locations for Enterprise. Hertz Global Holdings, Inc. (NYSE:HTZ) plans to add 300 neighborhood locations annually and also plans to target the insurance-replacement market. This is a key area for competitor Enterprise, where the insurance company pays the cost of the rental while a car is being repaired.

The rising competitor

Avis Budget Group Inc. (NASDAQ:CAR) rents cars under the “Avis” and “Budget” brands. The company also operates local and one-way truck rentals under its Budget brand with approximately 27,000 trucks.

In the first quarter of this year, revenue increased 4% to $1.7 billion. This was the eleventh consecutive quarter of year-over-year revenue growth. In North America, Avis Budget Group Inc. (NASDAQ:CAR) raised prices 4%. Off-airport business grew 7%, and this is a segment that Avis wants to target. Europe remained weak for the company and as a result its EBITDA declined to $93 million.

Going forward, the growth for Avis will come from its just completed acquisition of Zipcar, the world’s leading car share network. Zipcar has 792,000 members, an increase of 12% from last year. Avis has been actively integrating Zipcar into its Avis network and expects $50 million to $70 million in synergies within two years. The plan is to expand Zipcar globally under the Avis and Budget framework. Avis is expanding Zipcar to more airports and will have equipped 1,000 cars from the Avis and Budget fleets with Zipcar’s technology by the end of this summer.

The leading equipment rental company

United Rentals, Inc. (NYSE:URI) is the largest rental equipment company in the world. The company has over 830 rental locations in the U.S. and Canada. United Rentals has 13% of the North American market for construction and industrial equipment rentals.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

10 Covers of Popular Songs that are Better than the Originals

Must See TV: The 9 Most Anticipated Shows of 2015

The 15 Biggest Box Office Bombs of All Time

10 Things The World Can’t Stand About Americans

Picture Perfect: The 6 Smartphones with the Best Cameras

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Burger Kings: The 10 Most Expensive Burgers in the World

The 10 Most Ethnically Diverse Countries in the World

The 10 Most Exclusive Credit Cards in the World

The 10 Most Expensive Cruise Ships in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!