Hertz Global Holdings Inc. said it anticipates full-year
earnings to be at the top range of its forecast, providing a hefty
lift for the company's stock after several financial restatements
and a deep retooling of operations.
The Naples, Fla., rental-car company on Friday reported another
round of accounting errors, lowering reported net income over 2011
through 2013 by a total of $144 million. Hertz's new chief
executive, John Tague, said the company has turned the page,
however, and expects consolidated earnings before interest, taxes,
depreciation and amortization of between $1.45 billion and $1.55
billion for the full year.
Investors were cheered by the forecast, with shares increasing
more than 20% during Friday's session and settling in at around
$19.18 in afternoon trading, or up 12.9%.
"We had been speaking with investors prepared for Ebitda guides
as low as $1 billion or less," Morgan Stanley analyst Adam Jonas
said in a research note. "Management also reiterated that 2015
should be viewed as a transition year and that third quarter would
likely be an inflection point for the year."
Mr. Jonas still has a $16 price target on the stock over
concerns about the vulnerability of the auto rental business.
Mr. Tague, speaking to analysts on a conference call, said Hertz
is planning cut annualized costs by as much as $300 million. About
$200 million will be realized this year.
"We have substantially rebuilt the senior leadership team with
best-in-class talent across the company," he said. "Our fleet
renewal is very close to completion, and the execution has been
exceptional. We've got our capacity in line with our demand."
Hertz, like its competitors, are facing new challenges within
the industry as the rise of car-sharing, such as Silcon
Valley-based Uber, continues to pressure the rental industry. Hertz
also operates the Dollar and Thrifty rental brands.
Mr. Tague's cost-reduction plan includes freezing defined
benefit pension plans, closing unprofitable off-airport facilities
and consolidating what the company spends on information technology
services provided by third parties.
Hertz will also buy back $1 billion worth of its own shares. The
buyback will be financed through a combination of free cash flow
and asset sales.
In June, Hertz raised airport retail car-rental fees by $5 a day
and $20 a week. Off-airport prices were increased by $3 a day and
$10 a week.
The company is still cooperating with an investigation by the
U.S. Securities and Exchange Commission over the restatement.
Write to Jeff Bennett at jeff.bennett@wsj.com and Nathan Becker
at nathan.becker@wsj.com
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