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Why Is Avis Budget (CAR) Up 21.2% Since Last Earnings Report?

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It has been about a month since the last earnings report for Avis Budget Group (CAR - Free Report) . Shares have added about 21.2% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Avis Budget due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Avis Budget Q2 Loss Wider-Than-Expected, Revenues Lag Estimates

Avis Budget reported second-quarter 2020 adjusted loss of $5.60 per share, wider than Zacks Consensus Estimate loss of $5.58. The company reported earnings of 79 cents per share in the year-ago quarter.

Total revenues of $760 million missed the consensus estimate by 8.3% but declined 67% year over year due to 59% decrease in rental days and 20% decrease in revenues per day.

The company expects velocity of improvement to moderate in the third quarter but anticipates utilization will continue to improve. Also, Avis Budget anticipates cash flow and Adjusted EBITDA to be both positive for the rest of 2020.

Revenues by Segment

Americas segment revenues of $565 million declined 65% year over year. The segment contributed 74% to total revenues.

International segment revenues of $195 million fell 73% year over year. The segment contributed 26% to total revenues.

Profitability

Adjusted loss before interest, taxes, depreciation and amortization was $382 million against loss of $175 million in the prior-year quarter.

Adjusted loss before interest, taxes, depreciation and amortization for Americas was $233 million against gain of $152 million in the prior-year quarter. Internationally, adjusted loss before interest, taxes, depreciation and amortization was $140 million, compared with the profit of $39 million in the prior-year quarter.

Balance Sheet and Cash Flow

Avis Budget exited second-quarter 2020 with cash and cash equivalents of $1.26 billion compared with $679 million at the end of the prior quarter. Corporate debt was $3.9 billion compared with $3.44 billion at the end of the prior quarter.

The company generated $10 million of cash from operating activities in the reported quarter. Adjusted free cash flow totaled $245 million and capital expenditure was $15 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -86.17% due to these changes.

VGM Scores

Currently, Avis Budget has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Avis Budget has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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