Hertz CEO: 3Q Results Likely to Exceed Our Expectations

Even though Hertz Global Holdings spent money to increase its global car rental network, the company’s chief executive officer said the third-quarter results are likely to exceed internal expectations.
Mark Frissora, chairman and CEO, said, “Despite additional costs to expand our global car rental network, including off-airport and Advantage in the U.S., third-quarter results are likely to exceed our internal expectations, demonstrating the long-term durability of our balanced efficiency and growth strategies.
“These strategies have enabled Hertz to improve adjusted pre-tax income five consecutive quarters, and to increase U.S. car rental revenues four consecutive quarters as we exit the worst recession in the company’s 91-year history,” he continued.
“Our success in the third quarter is due to higher than forecasted efficiency improvements, including lower fleet costs, as well as stronger pricing and demand in the U.S. and Europe car rental businesses, which are anticipated to generate exceptional results. For the third quarter, HERC is expected to record positive year-over-year revenue growth for the first time in two years. Additionally, HERC’s adjusted pre-tax income is also expected to improve by more than 30 percent year-over-year, with a corporate EBITDA margin of approximately 40 percent more evidence that our equipment rental business stabilized in the third quarter,” according to Frissora.
Based on the strong expected and efficiency savings revised to $410 million, lower fleet costs and continued improvements in the company’s car rental business, Hertz said it is increasing full-year 2010 diluted earnings per share guidance to a range of $0.47 to $0.48.
According to management, this includes the negative impact of about two cents per share that can be attributed to higher fourth quarter 2010 interest costs from a $700 million debt offering in September, which will reduce ongoing interest costs by $15 million annually between 2011 and 2016 when the funds are used to pay down higher-cost debt.
Hertz also revealed it anticipates doubling GAAP income before income taxes for the third quarter of 2010 and increasing adjusted pre-tax income by about 30 percent for the same period.
The resulting adjusted diluted earnings per share for the third quarter are estimated to come in at $0.40 compared with $0.31 for the same time frame in 2009.
Hertz said third-quarter GAAP diluted earnings per share are estimated to be $0.36 compared with $0.15 for the same period last year.
Officials said the increases are thanks to lower fleet costs and a third-quarter sales increase of more than 11 percent in the company’s U.S. car rental business.
Looking ahead, Frissora said, “We expect fourth-quarter results will reflect continued growth in our car rental businesses led by resilient commercial rental activity across our largest markets, as well as strong same-store growth in Advantage and off-airport in the U.S. These improvements are likely to be partially offset by lower leisure demand, as the fourth quarter is typically a trough period in this market, and by slightly softer pricing due to mix shifts (e.g., Advantage and off-airport growth), difficult year-over-year comparisons and competitive pressure.
“Also, we are achieving additional fleet efficiencies in depreciation costs and utilization across our car rental markets. We expect HERC will continue to generate sequential and year-over-year growth in revenues, adjusted pre-tax income and corporate EBITDA, with a corporate EBITDA margin approaching 42 percent for the quarter. While we have aged the HERC fleet to an average of approximately 50 months, which generates higher maintenance costs, these increases are being offset by other fleet and labor efficiencies, as well as solid same-store revenue growth across HERC’s North American markets,” he said.

– Auto Remarketing

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