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Will Avis Budget (CAR) Disappoint this Earnings Season?

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Leading global car rental company, Avis Budget Group Inc. (CAR - Free Report) is scheduled to report second-quarter 2017 results after the market closes on Aug 7.

Last quarter, the company witnessed a negative earnings surprise of 84.31%. Avis Budget missed earnings estimates thrice by a wide margin in the last four quarters, pulling down the average to a negative earnings surprise of 24.97%.

Let’s see how things are shaping up for this announcement.

Factors to Influence Q2 Results

During the quarter, the company inked a definitive agreement with Waymo, an Alphabet Inc. (GOOGL - Free Report) owned firm. Per the deal, the company will offer its support and maintenance services for Waymo’s self-driving fleet to make them readily available for riders round the clock. The strategic partnership will enable Avis Budget to leverage its current capabilities and assets to gain a first-hand in-depth knowhow of the technologies involved in self-driving cars that are likely to be the toast of the market in the near future. The partnership will be initially launched in Phoenix and is likely to gradually extend to other cities.

However, Avis Budget continues to face hurdles like high fleet costs and unfavorable currency headwinds. Evidently, the company’s earnings and earnings before interest, taxes, depreciation and amortization for the second quarter were hurt by high fleet costs across both its segments and adverse currency movements in the International segment. Though the company is progressing well with its disciplined pricing initiatives and expects these to offset the rising fleet costs, we would wait for more pronounced results on this front before being optimistic.

Also, a major portion of Avis Budget’s domestic car rental reservations come through third-party distribution channels. Consequently, any disruption and termination of relationships or reduction in transaction volume with such channels may have an adverse impact on the company’s financial condition as well as its operational results.

Earnings Whispers

Our proven model does not conclusively show that Avis Budget will beat earnings this time. 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. This is not the case here as you will see below.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks ESP: Avis Budget has an Earnings ESP of 0.00%. This is because both Most Accurate estimate and Zacks Consensus Estimate stand at 66 cents.

Avis Budget Group, Inc. Price and EPS Surprise


Avis Budget Group, Inc. Price and EPS Surprise | Avis Budget Group, Inc. Quote

Zacks Rank: Avis Budget carries a Zacks Rank #4 (Sell).

As it is we caution against stocks with a Zacks Rank #4 and #5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks that Warrant a Look

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:

Airgain, Inc. (AIRG - Free Report) with an Earnings ESP of +50% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Atwood Oceanics, Inc. has an Earnings ESP of +66.67% and a Zacks Rank #2. 

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