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Will Hertz's (HTZ) Dismal Earnings Trend Continue in Q2?

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Hertz Global Holdings Inc. (HTZ - Free Report) is scheduled to release second-quarter 2017 results on Aug 8. Last quarter, the company delivered a negative earnings surprise of 61%.

In fact, Hertz has missed our estimate in three of the trailing four quarters, with an average negative surprise of 24.9%. Let’s see how things are shaping up prior to this announcement.

What to Expect?

The question lingering in investors’ minds now is whether Hertz will be able to post positive earnings surprise in the quarter to be reported. The Zacks Consensus Estimate for the quarter under review is a loss of 10 cents per share, compared with earnings of 41 cents per share reported in the year-ago quarter. We note that the Zacks Consensus Estimate has been stable ahead of the earnings release. Analysts polled by Zacks expect revenues of $2.21 billion, down 2.7% from the year-ago quarter.

Furthermore, we note that the stock has underperformed the broader industry in the last three months. The company’s shares have declined 15.6%, while the industry grew 3.1%.



Factors at Play

Hertz’ bearish run can mainly be attributable to its disappointing past performance, as the company has lagged bottom-line estimates for three consecutive quarters now.

In first-quarter 2017, Hertz suffered a loss and also recorded soft revenues. Earnings were hurt by weak sales, increased fleet investments along with higher spending on tech and brand development, while fall in revenues was due to soft domestic and international sales.

Though performance remained disappointing, the company remains focused on turnaround plan, which keeps customers at centre stage. Further, the company remains keen on solving issues related to fleet and services, which were the main deterrents. In this regard, management remains on track to make investments in fleet, services, brand development and technology in 2017, which should help it regain solid market position.

Nonetheless, the aforementioned negative factors and unfavorable currency movements make us cautious about the upcoming results.

What the Zacks Model Unveils?

Our proven model does not conclusively show that Hertz is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Hertz has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at a loss of 10 cents per share. While the company’s Zacks Rank #3 increases the predictive power of ESP, we need to have a positive ESP to be confident about an earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Dollar General Corp. (DG - Free Report) currently has an Earnings ESP of +0.93% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Clorox Co. (CLX - Free Report) currently has an Earnings ESP of +0.67% and a Zacks Rank #3.

Nordstrom Inc. (JWN - Free Report) has an Earnings ESP of +3.28% and a Zacks Rank #3.

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