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Hertz CEO touting turnaround plan after third straight loss
[SOUTHFIELD, Michigan] Hertz Global Holdings Inc is making advances slimming its bloated fleet of fast-depreciating cars, tempering concerns about the rental-car company's financial footing as tech giants challenge its business model.
Hertz said its second quarter adjusted loss was 63 US cents per share, worse than the lowest analyst projection for a loss of 59 US cents a share in a Bloomberg survey. The company's shares rebounded in after-hours trading from their slump earlier Tuesday, as investors had feared the worst following Avis Budget Group Inc's cut to its profit forecast.
"We have made significant progress in the first half of the year, executing on our operating turnaround plan," Chief Executive Officer Kathryn Marinello said in a company statement. While Hertz increased spending in the first half of the year, it's completed a "transformation" of its fleet to cope with its vehicles losing their value, she said.
Ms Marinello took over Hertz in January and has tried to turn the company around by selling down its crowded fleet of discounted car models. At the same time, Hertz and Avis face major threats from the rise of ride-hailing and car-sharing companies like Uber Technologies Inc.
The early trend for Hertz's revenue per day in the US for the quarter that started in July has been promising, increasing about 3 per cent last month from a year earlier, according to the statement. Preliminary results in August are showing a similar trend, the company said.
Hertz shares climbed 2.9 per cent to US$14.70 as of 5:08pm in New York. The stock has still dropped 34 per cent this year through the close Tuesday.
Investors sold off Hertz shares and bonds last month after the company canceled plans to refinance some of its debt and offered little explanation for why. Analysts have speculated Ms Marinello, 61, may have decided to conserve cash instead of redeem the securities.
Ms Marinello was named CEO after billionaire investor Carl Icahn boosted his Hertz stake late last year. She plans to shrink the rental company's fleet of compact cars and family sedans and purchase more of the sport utility vehicles that are drawing greater demand from American consumers. The strategy hinges on SUVs improving the company's rental rates while in service and fetching better prices at auction when Hertz sells them off.
Avis on Monday projected full-year adjusted earnings per share in the range of US$2.40 to US$2.85, down from a previous forecast of as much as US$3.50. Avis shares plunged 9.9 per cent and have dropped 18 per cent this year as of Tuesday's close.