Shares of Hertz Global Holdings, Inc. (HTZ - Free Report) have lost 17.4% so far this year against its industry's 5.7% upside.
Reasons Behind the Lackluster Price Performance
In May, Hertz Global reported wider-than-expected loss in the first quarter of 2018. Quarterly loss also widened on a year-over-year basis due to high costs. Results were hurt by the slow progress of Hertz Global Holdings’ growth-oriented turnaround plan. Moreover, pricing pressure remains a major headwind due to low used car prices.
As the company is investing heavily in its turnaround plan, the bottom-line performance seems to be affected significantly. In the first quarter of 2018, total expenses were 111% of sales compared with 107% in 2017. Hertz Global expects U.S. RAC direct vehicle and operating (DOE) and SG&A expenses (as a % of revenues) to be higher in 2018 compared with the 2017 levels. Due to this elevated level of investment spending, earnings are expected to remain under pressure in the remainder of 2018.
Additionally, the company’s significant debt burden coupled with dwindling cash flows is a cause for concern. The presence of private players like Uber and Lyft is a major threat as far as the need for car rental is concerned. Structural issues with the car rental model are also worrisome. Furthermore, intense competition from players like Uber in addition to other car-sharing and ride-hailing services are hurting the company’s top-line growth prospects.
Other Unfavorable Readings
Over the last 60 days, the Zacks Consensus Estimate for current-year loss has widened significantly, reflecting negative sentiment surrounding the stock.
Additionally, the company’s Momentum Score of F highlights its short-term unattractiveness. Undoubtedly, the above negatives substantiate Hertz Global’s Zacks Rank #4 (Sell).
Stocks to Consider
Investors interested in the broader Transportation sector may consider GATX Corporation (GATX - Free Report) , SkyWest, Inc. (SKYW - Free Report) and Expeditors International of Washington, Inc. (EXPD - Free Report) . While GATX and SkyWest carry a Zacks Rank #2 (Buy), Expeditors sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past six months, shares of GATX and Expeditors have rallied more than 17% and 18%, respectively, while SkyWest stock has gained above 5%.
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