Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Why Hertz, Avis Are Breaking Down


With declining revenue and pricing pressure, rental-car companies are a wreck.

Car Rental Companies Ready to Break Down?

Has anyone noticed how the car rental companies, Hertz (HTZ), Avis (CAR), and Dollar Thrifty (DTG) have gone parabolic over the past few months? I didn't, until Minyan "Bark" brought it to my attention. Now I'm itching to establish a short position in one of these names.

And the rally, unlike in Ford (F) or the counter sell-off in auto-parts companies such as Autozone (AZO), comes way before the "cash for clunkers" was a gleam in Obama's eye. Back in December, these stocks were trading at about a buck a share and seemed destined to be sucked into the vortex of bankruptcy created by the Big Three as General Motors (GMGMQ), Ford, and Chrysler were their lifeline of products and to some extent, credit.

Not that their businesses were faring well by any measure. Rental volume and miles driven were down and pricing pressure was compressing margins. People are simply not traveling for business or leisure as much as they used to.

Rough Road Ahead

Aside from their suppliers still being in business, none of the above has really improved. Hertz, Avis, and Dollar all reported earnings in the past week and the numbers show it will be rough road ahead.

Hertz saw second-quarter profits sink 93% on a 24% decline in revenue. Full-year forecasts of $6.7 to $7 billion in revenue are below the low end of the previously stated range.

Avis posted both a sequential and year-over-year decline in revenue and profits -- actually, it was a loss, if you include restructuring costs. Every segment, from corporate accounts to vacation rentals to day trippers to truck rentals saw high single-digit percentage declines.
< Previous
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

Featured Videos