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

In the first quarter of this year, the company generated EBITDA of $451 million. This was a record for the company and was done in the slowest seasonal quarter. Rental rates increased 5.4% year-over-year. This rental rate increase resulted in an EBITDA increase of $40 million.

Last year, United Rentals, Inc. (NYSE:URI) acquired RSC Rentals and is still integrating the acquisition and expects further cost savings going forward. The company will also benefit from a pickup in demand from the housing and construction recovery. Where I see the real growth for the company, though, is in its sales force. Currently 38% of United Rentals’ business is unassigned accounts. These are typically local contractors that come in and rent when they need something. Right now there isn’t a salesperson assigned to those accounts to offer more services from United Rentals. The company has approximately 1,200 outside sales reps in the field and plans to increase that number by 10% in the next year. By catering to this 38% base, United Rentals can increase revenues and profits.

Foolish assessment

The old adage is “why buy when you can rent.” With these companies, they have perfected that business model and have built solid franchises. All three companies have been stellar performers in the past year and I see them continuing to perform well with the economic recovery.

Mark Yagalla has no position in any stocks mentioned. The Motley Fool owns shares of Hertz Global Holdings, Inc. (NYSE:HTZ). Mark is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article The Rental Business Beats Owning originally appeared on Fool.com and is written by Mark Yagalla.

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