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Avis Budget Group Inc. ( CAR - Analyst Report ) posted first-quarter 2011 net income of $7.0 million compared with a net loss of $38.0 million in the year-ago period. Excluding extraordinary items, quarterly income came in at $12.0 million or 11 cents a share. Earnings per share for the quarter topped the Zacks Consensus Estimate of a loss of 5 cents, significantly improving from the prior-year quarter loss of 13 cents a share.
Continued focus on productivity and cost containment initiatives, better travel trends and lower fleet costs drive the company to post better-than-expected financial results for the first quarter of fiscal 2011.
The company reported a 7.0% jump in net revenues to $1,235.0 million from $1,153.0 million in the year-ago period. Total revenue also surpassed the Zacks Consensus Estimate of $1,210.0 million. The increase was mainly attributable to a 7.0% rise in rental day volume. However, the growth was partially offset by a 1.0% decline in pricing. Growth in Ancillary revenues of 3.0% also contributed to the revenue increase.
By segment, domestic car rental revenue rose 6.0% to $929.0 million in the quarter primarily attributable to a 7.0% volume expansion. This was partially offset by a 3.0% fall in pricing. International car rental revenue growth came in at 15.0% to $231.0 million primarily due to 7.0% increase in rental days and increased pricing of 7.0%. Avis' truck rental increased 6.0% to $75.0 million primarily due to a 17.0% increase in rental days, partially offset by a 7.0% decline in pricing.
The company's adjusted EBITDA more than doubled to $81.0 million from $38.0 million reported in the year-ago period. EBITDA margin increased by 330 basis points to 6.6% mainly attributable to lower per-unit fleet cost, lower vehicle financing cost and incremental savings from cost-saving measures.
The company ended the quarter with cash and cash equivalents of $913.0 million and total debt of $5,111.0 million compared with $911.0 million of cash and $4,515.0 million of debt in the year-ago period. Moreover, during the quarter, Avis generated a cash flow of $277.0 million from its operating activities and a free cash flow of $6.0 million.
Avis Budget expects domestic vehicle depreciation costs to lower by 5.0% to 8.0% on a per unit basis in 2011 compared with 2010. The company is continuing with its efforts to reduce costs and enhance productivity through its Performance Excellence initiative and five-point cost-reduction and efficiency improvement plan.
The company expects its cost-saving initiatives to provide an incremental $50.0– $60.0 million of year-over-year savings in 2011. Since 2008, total annual savings from these initiatives are expected to be in the range of $560.0 million and $570.0 million in 2011.
Avis Budget Group is the leading general-use vehicle rental company in North America, Australia and New Zealand. Moreover, a formidable network of more than 6,500 rental locations and 350,000 vehicles enables the company to strengthen its well-established position in a highly competitive vehicle rental industry.
The company faces intense competition from other established players, such as Hertz Global Holdings Inc. ( HTZ - Snapshot Report ) , Enterprise Rent-A-Car, Dollar Thrifty Automotive Group Inc. ( ) and Ryder System Inc. ( R - Analyst Report ) .
Avis Budget shares maintain a Zacks #3 Rank, which translates into a short-term 'Hold' recommendation. Besides, the company retains a long-term 'Outperform' recommendation.
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