Economy Keeps Avis a Hold

The near-term outlook for Avis Budget Group (CAR) is difficult to ascertain. The truck rental business is experiencing pricing pressure and the economy is weakening. However, the management is now more focused on operations after the restructuring in 2007. 

Revenue enhancement and cost cutting initiatives have been implemented that should fuel significant financial improvements. However, earnings visibility is limited, especially with a deteriorating economy. Therefore, the Hold rating is maintained for Avis Budget Group.

The shares of Avis Budget Group have a limited valuation history due to the recent re-structuring of the parent company (Cendant) through spin-offs and asset sales in 2006. The target is $10.75, based on a 11 P/E multiple on 12 month trailing EPS, which is approximately where a 7% growth company with an average levered balance sheet should be valued as the U.S. economy appears to be entering a recession.

Read the full analyst report on CAR

Read the full analyst report on CAR