A month has gone by since the last earnings report for Avis Budget Group (CAR - Free Report) . Shares have lost about 3.9% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Avis Budget due for a breakout? 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 catalysts.
Avis Budget Tops Q2 Earnings Estimates, Revises Guidance
Avis Budget reported mixed second-quarter 2018 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues lagged the same.
Adjusted EPS of 57 cents outpaced the consensus mark by 2 cents and increased a massive 90% on a year-over-year basis. Earnings benefited from strong EBITDA performance, lower tax rates and reduced average share count.
Revenues totaled $2.3 billion, which missed the consensus estimate by $59 million but improved 4% year over year. The top line benefited from a 4% increase in volume, higher Americas underlying pricing under the company’s historical T&M per day metric and a 2% benefit from currency exchange rates.
Revenues by Segment
Revenues at the Americas segment increased 1.6% year over year to $1.6 billion. Segment revenues were positively impacted by 2% higher volumes, with growth both on and off airport. Revenue per Day was 1% lower mainly due to lower ancillary revenues and the change in loyalty accounting but was 1% higher under the company’s historical T&M per day metric. The segment accounted for 68% of total revenues.
Revenues at the International segment were up 9.7% year over year on a reported basis and 4% on a constant-currency basis to $738 million. The upside was driven by a 6% higher volume and a $40 million benefit from foreign currency rates, partially offset by a 2% lower local currency Revenue per Day. Rental days per day grew 6% primarily driven by strong growth in France, Italy and Spain. The segment contributed 32% to total revenues.
Adjusted EBITDA in the second quarter was $161 million, up 15% from the prior-year quarter, with margin increasing by 70 basis points (bps). This uptick can be attributed to strong revenue growth, 50 basis point improvements in utilization and a 5% reduction in local currency per-unit fleet costs.
Adjusted EBITDA for Americas was $107 million, up 11.5% from prior-year quarter. Revenue growth along with 70 basis points improvement in utilization and a 7% lower per-unit fleet costs drove the segment’s adjusted EBITDA figure. Adjusted EBITDA for International increased 20.3% year over year to $71 million. The increase was owing to strong revenue growth, improved utilization, unchanged per-unit fleet costs, and a $19 million benefit from currency.
Balance Sheet and Cash Flow
Avis Budget exited the quarter with cash and cash equivalents of $489 million compared with $544 million in the prior quarter. Corporate debt at the end of the second quarter was $3.6 billion, flat with the prior-quarter tally. The company generated $618 million of cash from operating activities compared with $503 million in the previous quarter. Adjusted free cash flow totaled $70 million in the reported quarter.
For 2018, Avis Budget raised its adjusted EPS, adjusted net income and adjusted pretax income guidance but lowered its revenue guidance. It reiterated adjusted free cash flow and adjusted EBITDA guidance for the year. Adjusted EPS is expected to be between $3.00 and $3.85 compared with $2.90 and $3.75 projected earlier.
Further, adjusted net income is envisioned in the range of $245-$315 million compared with the prior anticipation of $240-$310 million. Adjusted pretax income is expected between $340 million and $420 million. The prior expectation was in the $330-$410 million band. The company expects revenues to be in the range of $9.05-$9.30 billion compared with the $9.20-$9.45 billion anticipated earlier. Adjusted free cash flow is consistently expected between $325 million and $375 million. Adjusted EBITDA is anticipated in the range of $740-$820 million.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month.
Currently, Avis Budget has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Avis Budget has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.