TLDR
- Hertz Global swung to a profit in the third quarter after nearly two years of losses, reporting adjusted earnings of $0.12 per share versus analyst estimates of $0.02 per share.
- The company’s quarterly revenue fell 4% year-over-year to $2.5 billion but beat analyst expectations of $2.4 billion by 3.1%.
- Hertz has been diversifying operations by updating its vehicle fleet and launching an online car-buying marketplace to counter slowing rental demand.
- The company sold most of its Tesla electric vehicles last year due to higher repair costs, shifting focus back to gas-powered cars.
- Shares jumped 27% in premarket trading and closed up 19.1% to $5.90 following the earnings announcement.
Hertz Global Holdings posted its first quarterly profit in nearly two years. The company reported adjusted earnings of $0.12 per share for the third quarter, crushing analyst expectations of just $0.02 per share.
Revenue came in at $2.48 billion for the quarter. This marked a 3.8% decline from the same period last year. However, it still beat Wall Street’s forecast of $2.4 billion by 3.1%.
The car rental company has been working to turn itself around after a rough stretch. Management has focused on revamping the vehicle fleet and expanding beyond traditional rentals.
Hertz Global Holdings, Inc., HTZ
Hertz launched a fully online car-buying marketplace as part of this strategy. The move aims to offset weakness in rental activity.
Fleet Changes Drive Performance
The company made a big bet on electric vehicles a few years ago. That didn’t work out as planned.
Hertz sold off most of its Tesla fleet last year. Higher repair costs were eating into profits.
The shift back to gas-powered vehicles appears to be paying off. Used vehicle sales and the newer fleet helped drive demand in the quarter.
Operating margin jumped to 19.4% in the third quarter. That’s up from negative 2.1% in the same period last year.
Free cash flow swung positive to $809 million. Last year’s third quarter saw negative cash flow of $154 million.
Strong Beat on Key Metrics
Adjusted EBITDA came in at $190 million for the quarter. Analysts had expected $170.3 million. That represents an 11.6% beat on expectations.
The EBITDA margin stood at 7.7%. This shows the company is getting better at controlling costs.
Earnings per share of $0.12 represented an 83.8% beat versus consensus. That’s a huge outperformance.
Investors loved the results. Shares jumped 27% in premarket trading on Tuesday morning.
The stock closed up 19.1% at $5.90 for the day. This pushed the company’s market cap to $1.54 billion.
The turnaround comes after years of struggle. Hertz’s revenue has declined 3.9% annually over the past two years.
The broader ground transportation industry has faced headwinds. Many competitors have seen similar revenue declines.
Over a five-year period, Hertz grew revenue at just 6% annually. That’s below average for the industrials sector.
The company has also diluted shareholders. Share count increased 11.3% over the past two years.
Wall Street analysts expect revenue to remain flat over the next 12 months. That’s still below sector averages but better than recent performance.
Hertz reported adjusted earnings of $0.12 per share in the third quarter, up from negative $0.68 in the same period last year, with quarterly revenue of $2.48 billion beating analyst estimates of $2.4 billion despite a 3.8% year-over-year decline.
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