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Hertz (HTZ) Down 50.2% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Hertz (HTZ - Free Report) . Shares have lost about 50.2% 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 drivers.

Hertz Global Incurs Loss in Q4

Hertz Global incurred a loss (excluding 59 cents from non-recurring items) of 24 cents per share in the fourth quarter of 2019, narrower than the Zacks Consensus Estimate of a loss of 25 cents. Moreover, the amount of loss decreased year over year.

Quarterly revenues of $2,326 million fell short of the Zacks Consensus Estimate of $2,340.6 million. However, the top line inched up 1.4% year over year, driven by an impressive performance of the U.S. Rental Car segment.

Segmental Performance

In the quarter under review, the U.S. Rental Car segment generated revenues of $1,673 million, up 6.2% year over year. This upside can be attributed to favorable pricing and higher volumes.

Vehicle utilization decreased to 79% from 81% a year ago. Transaction days improved 2% year over year on the back of robust demand from growth initiatives in TNC and delivery rentals. Total revenue per transaction day (RPD) increased 4%. Adjusted EBITDA for the segment was flat year over year at $48 million.

Segmental direct vehicle operating expenses rose 2.1% to $1,019 million. Meanwhile, interest expenses jumped 15.2%. Also, selling, general and administrative expenses climbed 3.3% year over year.

The International Rental Car segment generated revenues of $474 million, down 3% year over year. This downside was due to decreased volumes as a result of persistent weakness in the European market. Meanwhile, segmental revenues were flat on constant currency basis. Vehicle utilization was flat at 72%. Segmental RPD rose 1%.

Segmental direct vehicle operating costs were up 4% year over year to $312 million. However, interest expenses decreased 8%. Selling, general and administrative expenses also declined 16.4% year over year. Adjusted EBITDA for the segment came in at a loss of $10 million against profit of $8 million in the year-ago period. Meanwhile, revenues from all other operations plunged 23% to $179 million.

Balance Sheet Highlights

The company exited the fourth quarter with cash and cash equivalents of $865 million compared with $1.13 billion at the end of 2018. Restricted cash and cash equivalents at the end of the period came in at $495 million compared with $283 million at 2018 end. As of Dec 31, 2019, total debt amounted to $17.09 billion compared with $16.32 billion as of Dec 31, 2018.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -88.89% due to these changes.

VGM Scores

At this time, Hertz has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward 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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