Hertz Global Holdings, Inc. (HTZ), a car rental company, reported weak first-quarter 2024 results. Hertz announced it was reducing its EV fleet by another 10,000 and incurred a $195 million charge during the first quarter. That charge contributed to a $588 million rise in vehicle depreciation, resulting in a per-share loss nearly three times worse than analysts expected.
Moreover, in January, the car rental firm incurred a $245 charge as it moved to offload 20,000 EVs. These combined actions will cut Hertz’s EV fleet in half, with a significant portion consisting of Tesla, Inc. (TSLA).
HTZ reported a first-quarter adjusted loss per share of $1.28, compared to the loss per share of $0.43. The company’s RPD (Revenue per transaction day) of $56.68 reflected a decrease of 6.8% year-over-year. Also, direct operating expense on a per transaction day basis increased by 3% year-over-year, reflecting inflationary pressure and elevated collision and damage expense.
Gil West, CEO of HTZ, said, “Fleet and direct operating costs weighed on this quarter's performance. We're tackling both issues - getting to the right supply of vehicles at an acceptable capital cost while at the same time driving productivity up and operating costs down.”
Shares of HTZ have plunged 46.2% over the past six months and 75.2% over the past year to close the last trading session at $4.49. Also, the stock has declined 56.8% year-to-date.
Now, let’s discuss several other factors that could influence HTZ’s performance in the upcoming months:
Deteriorating Financials
For the first quarter that ended March 31, 2024, HTZ’s total revenues increased 1.6% year-over-year to $2.08 billion. However, its total RPU (Revenue per unit) per month decreased 7.2% year-over-year to $1.32 billion. Also, depreciation per unit per month for the quarter was $592 million, an increase of 134% year-over-year.
In addition, Hertz reported an adjusted net loss of $392 million, or $128 per share, compared to adjusted earnings of $126 million, or $0.39 per share, respectively. The company also reported an adjusted corporate EBITDA of negative $567 million versus an adjusted EBITDA of $237 million in the prior year’s quarter.
Also, HTZ’s cash and cash equivalents reduced to $465 million as of March 31, 2024, compared to $764 million as of December 31, 2023.
Disappointing Historical Growth
Over the past five years, HTZ’s revenue has decreased at a CAGR of 0.3%. The company’s EBITDA has fallen at an 18.6% CAGR over the same time frame. Furthermore, the company’s operations income (EBIT) has decreased at a 26% CAGR over the same period.
Unfavorable Analyst Estimates
Analysts expect HTZ’s revenue for the third quarter (ending September 2024) to grow 3.5% year-over-year to $2.80 billion. However, its EPS is expected to decrease 99.3% year-over-year to $0.01 for the current quarter. Moreover, the company has missed consensus EPS estimates in three of the trailing four quarters, which is quite disappointing.
Additionally, Hertz is expected to report a loss per share of $2.63 for the fiscal year 2024 (ending December 2024) and $0.16 for the fiscal year 2025.
Dim Profitability
HTZ’s trailing-12-month gross profit margin of 12.56% is 59.6% lower than the 31.08% industry average. Its trailing-12-month EBIT margin of 1.25% is 87.6% lower than the industry average of 10.14%. Likewise, its asset turnover ratio of 0.39x is 49.8% lower than the industry average of 0.78x.
Further, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 8.38%, 0.37%, and 0.96% are unfavorably compared to the industry averages of 12.40%, 7.21%, and 4.91%, respectively. Also, its net income margin of 2.49% is 59.1% lower than the industry average of 6.08%.
POWR Ratings Reflect a Bleak Outlook
HTZ’s bleak fundamentals are reflected in its POWR Ratings. The stock has an overall D rating, equating to a Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. HTZ has an F grade in Growth, consistent with its poor financial performance in the last reported quarter and unfavorable historical growth. The stock has a D for Stability, justified by its 60-month beta of 2.05.
Also, HTZ has a D grade for Momentum. The stock is currently trading below its 200-day moving average of $7.47, indicating a downtrend.
Within the Auto Dealer & Rentals industry, HTZ is ranked #18 out of 21 stocks.
Beyond what I have stated above, we have also given HTZ grades for Value, Quality, and Sentiment. Get all HTZ ratings here.
Bottom Line
HTZ reported a per-share loss approximately three times worse than analyst estimates in the first quarter of 2024 as the company unwinds its Tesla fleet. Hertz announced that it was cutting its EV fleet by an additional 10,000 vehicles, which indicates potential challenges in managing and integrating electric vehicles into their fleet.
In the first quarter, the company took a significant $195 million charge related to this EV fleet reduction, contributing to a $588 million rise in vehicle depreciation. The ongoing financial losses from its ill-fated Tesla EV plan weigh heavily on the stock, as investors are concerned about the car rental firm’s ability to turn this around.
Considering HLZ’s disappointing financials and bleak growth prospects, it would be wise to avoid this stock now.
Stocks to Consider Instead of Hertz Global Holdings, Inc. (HTZ)
Given its uncertain short-term prospects, the odds of HTZ outperforming in the weeks and months ahead are compromised. However, there are many industry peers with much more impressive POWR Ratings. So, consider these two B-rated (Buy) stocks from the Auto Dealer & Rentals industry instead: Credit Acceptance Corporation (CACC) and USS CO LTD (USSJY).
To explore more A and B-rated auto stocks, click here.
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HTZ shares fell $0.05 (-1.11%) in premarket trading Wednesday. Year-to-date, HTZ has declined -56.79%, versus a 19.59% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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