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Hertz Global Stock Falls Despite Upbeat Q1 Results

Hertz Global Holdings, Inc. (NASDAQ: HTZ) reported impressive results for the first quarter of 2022. Its earnings and sales surprise in the quarter were 4.8% and 3.4%, respectively.

Shares of this car rental company are currently down 10% today.

Financial Highlights

In the quarter, Hertz Global’s adjusted earnings were $0.87 per share, surpassing the consensus estimate of $0.83 per share. Also, the bottom line improved from the year-ago loss of $0.33 per share.

Revenues generated were $1.8 billion, above the consensus estimate of $1.74 billion. On a year-over-year basis, the top line increased by 40%, driven by healthy growth in both segments.

Revenue of the Americas RAC segment stood at $1,558 million, reflecting a surge of 61% from the year-ago quarter. On the other hand, the revenue of the International RAC segment expanded 36% to $252 million.

Average vehicle units were 481,211, up 31% year-over-year, while average rentable vehicles grew 26% to 455,517. Vehicle utilization was down 100 basis points (bps) to 74.7%. Total revenue per unit (RPU) per month was up 26% to $1,326, driven by travel demand and structural improvements.

Direct vehicle and operating costs in the quarter were $1.05 billion, up 35.3% from the year-ago tally. Adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) in the quarter came in at $614 million, up from just $2 million in the year-ago quarter. The adjusted EBITDA margin was 34% in the quarter.

Depreciation per unit per month was ($40) versus $219 in the year-ago quarter.

Balance Sheet and Cash Flow

Exiting the first quarter, Hertz Global’s cash and cash equivalents were $1.52 billion, down 32.6% from the end of 2021. Total debt was $12.08 billion, up 10.8% from the previous quarter.

In the quarter, the company’s net cash flow from operating activities was $621 million, up from $200 million in the year-ago quarter. Revenue earnings vehicle expenditure in the quarter jumped 96.8% to $2,985 million.

Management Commentary

Hertz Global’s CEO, Stephen Scherr, said, “…I am equally pleased with our momentum on customer experience – especially as we move into the peak summer travel season and as we play a more central role in mobility over the longer term.”

Capital Deployment

In the first quarter of 2022, Hertz Global repaid vehicle debt of $3.49 billion versus the year-ago tally of $946 million. Share buybacks in the quarter were $766 million.

Wall Street’s Take

Recently, Chris Woronka of Deutsche Bank maintained a Buy rating on Hertz Global and a price target of $36 (70.9% upside potential).

Overall, the analyst community is cautiously optimistic about Hertz Global. The stock has a Moderate Buy consensus rating based on two Buy ratings assigned in the past three months. The average Hertz Global’s price forecast of $34 implies 61.4% upside potential from current levels.

Over the past year, shares of Hertz Global have decreased 22.3%.

Blogger Sentiment

The TipRanks Bloggers Sentiments tool suggests that 80% of bloggers’ opinions are Bullish on HTZ compared with the sector average of 69%.

Conclusion

Hertz Global is working on multiple strategic initiatives, including a focus on electric vehicles, fleet diversification, digitalization, expansion of its customer base, and joint marketing programs. However, high costs and expenses are concerning for the company.

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