Financial Performance

Hertz Returns to Profit But Shares Drop 2%

The company says its third-quarter results show it is on "the right strategic path" with a turnaround plan that has included cutting its rental fleet.
Matthew HellerNovember 10, 2017

Hertz reported its first quarterly profit in a year but investors appeared unsure about the progress of its turnaround plan as its shares fell more than 2% in trading Friday.

The car rental company said Thursday its third-quarter net income rose to $93 million, or $1.12 per share, from $42 million, or 52 cents per share, a year earlier. Excluding one-time items, earnings came in at $1.42 per share, beating analysts’ estimates of $1.32 per share.

Total revenue rose 1% to $2.6 billion, against estimates of $2.57 billion.

Drive Business Strategy and Growth

Drive Business Strategy and Growth

Learn how NetSuite Financial Management allows you to quickly and easily model what-if scenarios and generate reports.

“Our operating turnaround plan, focused on growth through enhanced fleet, service, brands and technology, is showing encouraging progress, evidence that Hertz is on the right strategic path,” Hertz CEO Kathryn Marinello said in a news release.

The third quarter, she added, benefited from “continued improvements in our fleet offering, expansion of our Ultimate Choice program, and a strategic focus on optimizing revenue management.”

In after-hours trading Thursday, Hertz shares surged as much as 10% to $22.05 but the stock fell 2.25% on Friday, closing at $19.56.

As CNBC reports, “Doubts about over-capacity and industry pricing have weighed on the rental car companies’ shares, as have concerns that off-lease cars are flooding the used-car market. The rise of car-sharing companies also make some investors wary.”

As part of its turnaround plan, Hertz has reduced its rental fleet. Some analysts were encouraged by its third-quarter performance.

“We see 3Q results as confirmation that negative pricing and fleet cost trends bottomed and that earnings momentum is turning,” Christopher Agnew of MKM Partners said in a client note. “The company recently announced it successfully refinanced and amended important parts of its balance sheet and we believe this should provide further evidence that the company has turned a corner.”

But Credit Suisse’s Anjaneya Singh remained skeptical that the positive trend in fleet costs “can be enduring or is more a function of extremely high fleet costs recently.”

Another important metric for Hertz, revenue per transaction day, showed a 2% increase to $45.04 in the third quarter.