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

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Comments
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

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

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 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!