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 44 percentage points in 21 months Learn how!

Lists

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Top 6 Things You Can Do To Increase Your Productivity

Top 9 Trending Smartphones in 2013

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!