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Momentum

Jared Levy

Dollar Thrifty Automotive Group, Inc.

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Dollar Thrifty Automotive Group, Inc. (DTG

This car company showed strong Q3 results and beat estimates across the board.  Now with a new CEO, great rates and increasing demand, they may be poised for another strong year after rising 53% over the past twelve months.

Company Description & Developments
Unless you’ve been living under a rock for the past couple years, you know that consumers have been strained and taking more “stay-cations” than normal. There no doubt is an itch among many of us to take a real vacation and maybe just maybe rent a car in the process.

Even though growth is still slow, Americans and corporations are spending more on travel.   

This time around I wouldn’t expect the general populous to splurge on first class plane tickets and high end luxury auto rentals.   Consumers are watching their budgets and looking for the best deals and that is where a company like Dollar Thrifty comes in.

Dollar Thrifty Automotive Group, headquartered in Oklahoma offers global automotive rental solutions in both the traditional corporate structure as well as franchises of their Thrifty brand.  Their brands have been around since the mid 20th century (1965 Dollar and 1950 Thifty)

Between their Dollar and Thrifty brands, they cover approximately 1,575 corporate and franchised worldwide locations including approximately 600 in the United States and Canada. They operate in virtually all of the top U.S. and Canadian airport markets and are expanding globally.

They operate their business without any corporate debt and a ton of liquidity. Through their partners such as American Airlines, United, Southwest, Orbitz, Hotwire, Travelocity and more, they are able to weave and combine their low cost rentals into natural travel searches and online bookings.

Financial Profile
Dollar Thrifty Automotive Group is a mid cap company that is trading at about 16.6 times trailing earnings (P/E).  Looking forward, Zacks Consensus Estimates see Dollar Thrifty Automotive Group P/E dropping to 15, with no change in price from these levels.

Dollar Thrifty Automotive Group was just upgraded to a Zacks Rank 1 Strong Buy today.

Analysts have held their estimates steady over the past month; however we did see upward revisions from several analysts over the past 90 days to the next quarter, current year and 2012 earnings projections.

Last quarter DTG reported sales growth of 1.84% year over year and a jump of 14.32% over the previous quarter, so perhaps growth has been accelerating as of late.  They are expected to earn $4.80 in FY2011 according to the Zacks Consensus Estimate. 

Earnings Estimates
Expectations are for Dollar Thrifty Automotive Group to make 76 cents this quarter when they report on February 23rd.  Of the five analysts that cover Dollar Thrifty, the consensus is for the company to grow earnings by 13.11% in FY2011 and just slightly less (-3.00%) in FY2012.

Dollar Thrifty Automotive Group surprised analysts to the upside by 7.5% last quarter, with the average earnings surprise being a positive 12.33%.   They reaffirmed their earnings outlook in November 2011 for revenue growth of 1 to 2 percent in FY2011. 

There is also a bit of chatter about consolidation in the industry and that Dollar Thrifty would be the last “prize” in the space, but I wouldn’t base my investment on that data alone.

Market Performance & Techincals
Like most of our momentum stocks, Dollar Thrifty Automotive Group has been strong over the past several months and is currently trading about $12.00 under its 52 week high of $84.27.  Overall, the patterns for DTG are bullish.  The stock remains in a bullish channel and firmly above its 50 and 200 day moving averages of $67.89 and $68.69 respectively.

It is important to note that this high beta stock has been tightening its trading range recently and may be setting up for a big move. 

Dollar Thrifty Automotive Group has also outpaced the S&P 500 by 51% over the past year and almost 15% over the past 3 months, but has been basically flat against the index for the past month.

If the broad market turns lower, chances are that a stock like DTG will exaggerate those moves, same goes for the upside, so use caution if you think markets are due for a pullback.    

 Jared A Levy is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Whisper Trader Service.

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