Bear Of The Day: Hertz Global

Hertz Global (HTZ) currently lands a Zacks Rank #5 (Strong Sell) with its Transportation-Services Industry in the bottom 15% of over 250 Zacks Industries. Investors may want to be cautious at the moment with Hertz not far removed from bankruptcy and facing increasing competition.


Cautionary Tale

Not that Hertz won’t enjoy future success, but investors should be mindful that the company recently exited bankruptcy in July of 2021.

After filing for Chapter 11, Hertz was delisted by the New York Stock Exchange in October 2020 but was relisted on the Nasdaq in November 2021. Hertz has a long history that dates back to 1918 with the company dominating the U.S. rental car industry for many years.

However, the Covid-19 pandemic crippled the company as travel stopped and highlighted management’s inability to preserve cash and an adequate balance sheet at the time. Compounding the challenges were Hertz’s total liabilities which were at multi-year highs as shown in the nearby chart.

Furthermore, with CFO Kenny Cheung recently leaving the company in late March there may be cause for concern. The company stated Cheung left for another professional opportunity in a different industry and has since appointed Chief Accounting Officer Alexandra Brooks as interim CFO.

(Click on image to enlarge)

Zacks Investment Research

Image Source: Zacks Investment Research

Growth Competition

What also lead to Hertz’s trouble in recent years was increasing competition. After historically controlling the broader rental car industry, competitors like Avis Budget Group (CAR) continued to expand while Hertz’s shrank.

Notably, Hertz’s earnings estimate revisions have started to decline following its CFO’s departure while Avis EPS estimates are rising. Hertz’s earnings are now forecasted to drop -39% in fiscal 2023 at $2.27 per share compared to EPS of $3.74 in 2022. More concerning, fiscal 2024 EPS is expected to decline another -18%.

(Click on image to enlarge)

Zacks Investment Research

Image Source: Zacks Investment Research

Avis annual earnings are expected to experience a dip as well but the company’s bottom line remains light years ahead of Hertz on top of CAR's earnings estimates soaring over the last quarter as shown in the chart below.

This is indicative of Avis continuing to take market share. For now, Hertz declining earnings estimates may somewhat be symbolic of the company's inability to stop the bleeding.

(Click on image to enlarge)

Zacks Investment Research

Image Source: Zacks Investment Research


Bottom Line

Considering Hertz recently exited bankruptcy, the recent departure of its CFO may look like a red flag to many and investors will want to be cautious of HTZ stock as there could be more short-term weakness ahead.

Reconfirming this possibility is the declining earnings estimates and Hertz’s fall since relisting on the Nasdaq in 2021 could continue with shares of HTZ now down -40%.

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Disclosure: contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any specific ...

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