Avis Budget to Outperform

We maintain our long-term Outperform recommendation on Avis Budget Group Inc. (CAR - Analyst Report). 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 7,800 rental locations and 350,000 vehicles enable the company to strengthen its well-established position in a highly competitive vehicle rental industry.

Recently, Avis Budget reported robust second-quarter 2011 result. Quarterly earnings of 63 cents per share for the quarter were more than double the Zacks Consensus Estimate of 31 cents. This was a considerable improvement from the prior-year quarter income of 25 cents a share. The increase was primarily driven by strong growth in top-line resulting from a rise of 8% in rental days.

Moreover, Avis Budget has launched its own sales force in the European region as a means to own and leverage the local opportunities and for customers to drive inbound business. The company believes that the new sales force in the European region will add $30 - $50 million to total revenue in fiscal 2011.

Further, in an effort to control costs and boost profitability, Avis Budget has undertaken Performance Excellence initiative along with five-point cost-reduction and efficiency improvement plan. The company expects its cost-cutting initiatives to further augment its annual savings by $55-$65 million in 2011. The total annual savings from the company's actions since 2008 are expected to exceed $565 - $575 million in 2011.

Besides, it is expected that the travel trends in fiscal 2011 will remain positive, which would drive incremental demand for both commercial and leisure car rental. Moreover, management is expecting a 10% EBITDA margin in the intermediate term due to the strength of the used car market and pent up demand for used cars in Japan after the earthquake.

Avis Budget, which competes with Hertz Global Holdings Inc. (HTZ - Snapshot Report), Enterprise Rent-A-Car, Dollar Thrifty Automotive Group Inc. (DTG - Snapshot Report) and Ryder System Inc. (R - Analyst Report)., currently holds a Zacks #1 Rank, which translates into a short-term 'Strong Buy' rating.

Read the full analyst report on CAR

Read the full analyst report on HTZ

Read the full analyst report on DTG

Read the full analyst report on R