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Hertz Beats on Q3 Earnings and Rev

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Hertz Global Holdings, Inc. (HTZ - Free Report) posted better-than-expected third-quarter 2013 results, with adjusted earnings per share of 73 cents surpassing the Zacks Consensus Estimate by a couple of cents. The quarterly earnings rose 15.9% from 63 cents per share earned in the prior-year quarter on the back of robust sales in its four principal businesses including U.S. off-airport car rental, Donlen, worldwide equipment rental and Dollar Thrifty.

Reported earnings came in at 47 cents a share, 14.5% lower than 55 cents a share earned in the prior-year quarter.

Net revenue at Hertz increased approximately 22% to $3,069.4 million year over year and beat the Zacks Consensus Estimate of $3,022 million. Increased revenue was primarily accountable to the acquisition of Dollar Thrifty, one of its small competitors.

During the quarter, earnings before interest, taxes, depreciation and amortization (EBITDA) of the company climbed 22% from third-quarter 2012to $740.8 million.

Segment Performance

Revenues for the U.S Car rental segment escalated 32.6% year over year to $1,765.5 million owing to the acquisition of Dollar Thrifty, facilitating a rise of 28.4% in record transaction days. However, this was partially offset by the divestiture of Advantage. During the quarter, U.S off-airport sales and car rental total revenue per transaction day (RPD) surged 11.1% and 2.0% on a year-on-year basis, respectively.

Dollar Thrifty also led the average number of cars operated to shoot up by 33.9% year over year to 493,400.

Compared to the previous-year quarter, quarterly revenues for the International car rental segment came in at $768.6 million, reflecting a 9.7% year over year growth, and benefited mainly from the achievement of record transaction days that increased 5.5% owing to the sturdy performance in Europe. Rental car total RPD for the segment rose 2.9%.

In the reported quarter, the average number of company operated cars for the International segment totaled 187,900, showcasing a 3.5% year-on-year growth.

Quarterly revenues from worldwide equipment rental segment advanced 10.7% year over year to $401.8 million being favorably impacted by a 14.9% increase in equipment rental volume coupled with a 2.9% price hike.

During the quarter, revenues from all other operations segment rose 9.7% from the previous year period to $133.5 million owing to higher revenue contribution Donlen business.

Financial updates

Hertz ended the quarter with cash and cash equivalents of $548.7 million, total debt of $17,136.2 million, and shareholders’ equity of $2,820.9 million.

Free cash flow during the quarter came in at $418.5 million compared with negative free cash flow of $100.8 million in the year-ago quarter backed by steady growth in earnings and performance of working capital. However, this was partly offset by accelerated investments and capital expenses.

Under the new share buyback program announced by management, the company can repurchase shares worth up to $300 million.

Going Forward

This largest general use car rental brand maintained its guidance issued on Sep 26, 2013. The company forecasted revenues from the worldwide segment to range from $10,800–$10,900 million, corporate EBITDA between $2,120 and $2,190 million and earnings in the band of $1.68 and $1.78 per share. The current Zacks Consensus Estimate for 2013 is $1.74 per share.

Hertz expects to meet its targets for fiscal 2013 owing to the Dollar Thrifty acquisition. Alongside, it is striving to maintain its European profit enhancement program in the last quarter.

Other Stocks to Consider

This leading airport car rental brand in the U.S. and at 120 major airports in Europe holds a Zacks Rank #5 (Strong Sell). Other stocks in the related industry warranting a look include ExamWorks Group, Inc. and SouFun Holdings Ltd. (SFUN - Free Report) , both carrying a Zacks Rank #1 (Strong Buy) along with comScore, Inc. (SCOR - Free Report) holding a Zacks Rank #2 (Buy).

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