Hertz shares move downwards on projected lower profits
Published: 02 Apr 2008
Share price of Hertz Global Holdings Inc. dropped on worries that lower demand for rental vehicles and a possible drop in used-car values could result in lower profits.
In midday trading on Monday, Hertz shares fell 69 cents, or 5.6 percent, to $11.66 after dropping to $11.57 earlier in the day. Over the past 52 weeks, the company's shares have traded between $9.90 and $27.20, according to AP.
William B. Truelove of UBS Investment Research initiated coverage of Hertz with a "Neutral" rating and $13.75 price target, saying that the company faces a number of near-term hurdles. In the same report,
Truelove said a reduction in airline capacity, moderating business travel trends and an expected moderation in used-vehicle purchases will combine to put increased pressure on Hertz's cash flow as it moves away from program vehicles.
"Given the challenges listed above, our assumptions result in estimates below 2008 consensus and slightly below management's low-end 2008 expectation," Truelove wrote in a note to investors. "As such, we don't expect to see much stock upside in the near-term until estimates come down."
The analyst said he expects Hertz to post per-share profits of $1.34, $1.66 and $1.84 over the next three years, respectively. Analysts, on average, expect per-share profits of $1.41 in 2008 and $1.67 in 2009. Meanwhile, Hertz has said it expects a 2008 profit of $1.38 to $1.44 per share.
In February this year, the company shared that it had managed a record fourth quarter worldwide revenues of $2.14 billion, up 7.4% year-over-year. International revenues now comprise 34.1% of total worldwide revenues, up 4.5 pps.
Other highlights were:
-- Adjusted net income of $93.9 million in Q4, up 14.9%, or adjusted earnings per share of $0.29, compared with $0.25 in the fourth quarter of 2006.
-- Full year 2007 revenues increased 7.8%; adjusted pre-tax income up 35.8%; a year-over-year 210 basis point improvement in adjusted direct operating expenses, expressed as a percentage of revenues.
-- Levered cash flows for the full year 2007 almost doubled to $552.6 million, compared with 2006.
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