Published February 25, 2013
F – Hertz Global Holdings Inc's quarterly results came in above Wall Street expectations and the Car rental company forecast a strong year ahead, aided by robust demand and improving pricing in North America.
Hertz is also getting a boost from the addition of the Dollar Thrifty brands which it bought for $2.6 billion in late 2012. Cost synergies from the acquisition are expected to be $300 million from 2013 through 2015, while revenue synergies will be another $300 million over the same period, exceeding prior forecasts.
The company's stock rose 9 percent to $20.37 on Monday, making it one of the biggest percentage gainers on the New York Stock Exchange. Shares of rival Avis Budget Group Inc were up 5 percent on the Nasdaq.
Hertz is off to a "fast start" for the year, Chief Executive Mark Frissora said in a statement.
The company forecast adjusted earnings of $1.82 to $1.92 per share for 2013 on revenue of $10.85 billion to $10.95 billion.
Analysts on average expect earnings of $1.78 per share on revenue of $10.79 billion, according to Thomson Reuters I/B/E/S.
The car rental industry, tied closely to airline traffic and hotel bookings, has benefited from recovering business and travel in the United States.
Pricing in the U.S. commercial business, which serves corporate customers at airports, has been under pressure in recent quarters as the major players try to attract more customers by offering lower prices.
Hertz, however, said pricing improved in the fourth quarter. Car rental revenue per transaction day at U.S. airports rose 6 percent for Hertz and 2.6 percent for Dollar Thrifty in January.
This compares with a 1.6 percent increase for Hertz in December and 4.6 percent for Dollar Thrifty.
Revenue per transaction day, an indicator of pricing, will be flat for the full year, the CEO said on the call, though he acknowledged that the company was being conservative.
"We expect continued pricing pressure on contracted rates year-over-year. However, we made a strategic decision to minimize our participation with less profitable commercial accounts," Frissora said.
To diversify away from commercial airport rentals, Hertz fought a long battle with Avis over Dollar Thrifty, which serves the leisure car rental market.
After more than two years of first making a public offer for Dollar Thrifty, Hertz closed the acquisition after it agreed to give up 29 Dollar Thrifty airport locations and sell its low-cost Advantage brand.
The acquisition is expected to cement Hertz's No. 2 position in the global car rental rankings behind privately held Enterprise Holdings.
Hertz's net loss was $36.4 million, or 9 cents per share, in the fourth quarter, compared with net income of $52.1 million, or 11 cents per share, a year earlier.
Excluding items, Hertz earned 33 cents per share.
Revenue rose 15 percent to $2.3 billion.
Analysts expected earnings of 31 cents per share on revenue of $2.27 billion.
Park Ridge, New Jersey-based Hertz's shares have gained nearly 50 percent since announcing the Dollar Thrifty acquisition in August 2012.