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Why Is Hertz (HTZ) Down 15.3% Since Last Earnings Report?

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It has been about a month since the last earnings report for Hertz (HTZ - Free Report) . Shares have lost about 15.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Hertz due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Narrower-Than-Expected Loss at Hertz Global in Q4

Hertz Global reported better-than-expected results in the fourth quarter of 2018. Following the quarterly results, shares of the company gained significantly in after-market trading on Feb 25.

The company incurred adjusted loss of 55 cents per share in the reported quarter, narrower than the Zacks Consensus Estimate of a loss of 82 cents. Moreover, the amount of loss decreased on a year-over-year basis.
 
Quarterly revenues came in at $2.29 billion, outpacing the Zacks Consensus Estimate of $2.18 billion and improved 10% on a year-over-year basis. Impressive performance of the U.S. Rental Car segment dove the top line.

Segmental Performance

In the quarter under review, the U.S. Rental Car segment generated revenues of $1.58 billion, up 10% year over year. The upside can be attributed to increased volumes and pricing both on and off airport.

Vehicle utilization improved 10 basis points to 81% on the back of efficient fleet management. Excluding fleet dedicated to transportation network companies ("TNC") rentals, revenues increased 7%. In fourth-quarter 2018, direct vehicle operating and selling, general and administrative costs (as a % of total segmental revenues) increased to 71% from 70% a year ago.

The International Rental Car segment generated revenues of $487 million, flat year over year. Segmental revenues climbed 4% excluding foreign currency impact. Total revenue per transaction day (RPD) remained unaltered year over year.

Segmental direct vehicle operating and selling, general and administrative costs (as a % of total segmental revenues) declined to 74% from 75% a year ago. Revenues from all other operations surged 39% to $232 million.

Balance Sheet and Cash Flow

Hertz Global exited the fourth quarter with cash and cash equivalents of $1.13 billion compared with $1,072 million at the end of 2017. Restricted cash at the end of the quarter totaled $283 million compared with $432 million at the end of 2017.

As of Dec 31, total debt amounted to $16.32 billion compared with $14.86 billion as of Dec 31, 2017. Cash flows provided by operating activities during 2018 totaled $2.56 billion compared with $2.39 billion in the year-ago period.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted -12.07% due to these changes.

VGM Scores

At this time, Hertz has a great Growth Score of A, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% 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.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Hertz has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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