Hertz Global Holdings, Inc. (HTZ): Is it Time to Buy the Rental?

Page 1 of 2

Car rental giant Hertz Global Holdings, Inc. (NYSE:HTZ) recently hit five-year highs, despite posting a loss during its fourth quarter. The second largest car rental company in America reported a strong outlook for 2013, as it regains pricing power against its rivals and puts its recent acquisition of Dollar Thrifty to good use. Should investors consider buying this rental?

HTZ data by YCharts

Fourth Quarter

For its fourth quarter, Park Ridge, New Jersey-based Hertz Global Holdings, Inc. (NYSE:HTZ) posted a loss of 9 cents per share, or $36.4 million – which initially looked like a sharp decline from the 11 cents per share, or $52.1 million, it earned in the prior year quarter. However, excluding one-time charges, such as its acquisition of Dollar Thrifty, Hertz earned 33 cents per share, topping the Thomson Reuters’ forecast by two cents.

Hertz’s revenue rose 15% to $2.3 billion, also topping the estimate of $2.27 billion.

Hertz Global Holdings, Inc. (NYSE:HTZ)2013 Forecast

Hertz also sees clear roads ahead for 2013, and expects to earn $1.82 to $1.92 in adjusted earnings on revenue of $10.85 billion to $10.95 billion.

Both top and bottom line estimates exceed the Thomson Reuters’ forecast of $1.78 per share on revenue of $10.79 billion.

Dollar Thrifty

Hertz has long been locked in a pricing war against Avis Budget Group Inc. (NASDAQ:CAR) and privately held Enterprise Holdings at airports worldwide.

To decrease its dependence on low-margin airport rentals, Hertz has tirelessly attempted to acquire Dollar Thrifty — which serves the leisure car rental market — over the past two years. The FTC wasn’t too keen on the deal, which it believed would give Hertz an unfair advantage over its competitors.

Hertz finally sealed the deal in November 2012 for $2.6 billion, but with a catch — it had to give up 29 of Dollar Thrifty’s airport locations and sell its low-cost Advantage brand, which operates at 62 locations. The newly merged company, after reductions, will have 10,400 locations across 150 countries.

Hertz also stated that the synergies from the acquisition would likely exceed its earlier forecasts, but declined to provide exact projections.

Hertz’s acquisition of Dollar Thrifty mirrors Avis’ recent $500 million acquisition of Zipcar Inc (NASDAQ:ZIP), the world’s largest car-sharing network, which gave it a competitive edge in college and urban areas. The acquisition also allows Avis to diversify away from its traditional airport rentals model.

With only two publicly traded players left on the field and the FTC getting involved, the car rental industry is now heavily consolidated – which means that other smaller, overseas businesses, such as German rental company Sixt AG, could be next on their shopping lists.

‘A fast start’

Hertz CEO Mark Frissora stated that the company was off to a “fast start” for the new year. The company has been traditionally tied to airline traffic and hotel bookings, since its rentals are often added as part of a package deal by booking services such as Orbitz Worldwide, Inc. (NYSE:OWW) and Priceline.com Inc (NASDAQ:PCLN). A recovery in domestic business and air travel helped boost its January numbers.

Car Rental Revenue Growth at U.S. Airports

December 2012 January 2013
Hertz 1.6% 6.0%
Dollar Thrifty 4.6% 2.6%

Source: Hertz Q4 Reports

The decline in Dollar Thrifty’s numbers was attributed to the aforementioned reduction of the company’s businesses — a requirement of the Hertz acquisition — and should not alarm investors.

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 Click to see monthly returns in table format!

Lists

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered 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!