Hertz Global Holdings Inc. plunged the most in more than a year after reporting rising costs, even as earnings for the second-quarter beat analyst estimates.
(Bloomberg) — Hertz Global Holdings Inc. plunged the most in more than a year after reporting rising costs, even as earnings for the second-quarter beat analyst estimates.
Weaker car prices in the US nearly tripled the depreciation of Hertz’s vehicles, to $195 a car per month. Hertz rented its cars at a higher rate to sustain profits, the company said.
Shares fell 12% over the course of the trading day Thursday, the steepest single-day decline since May 2022.
Hertz is settling from the fierce rental market of 2022 into a more stable period, which means stronger travel activity but also lower values for the cars in its fleet. Rental companies and car dealers have been wrestling with a softening of the used car market, which has tumbled from near-record pricing a year ago and declined 11% again in mid-July.
“We’re running our fleet very hot and we are very efficient in how we use our assets,” Chief Executive Officer Stephen Scherr said in an interview.
Hertz said travel demand rose in the quarter as the company reported an increase in transactions and kept more of its cars rented out to travelers, which helped overcome the jump in costs.
Hertz had an average 82% of its fleet out for rental during the second quarter, up three percentage points from a year ago. Given the rebound in travel, Scherr said the company should be able to get that rate closer to 90%.
The Estero, Florida-based company said revenue rose 4% in the quarter to $2.4 billion, roughly in line with analysts’ estimates. Net income was $227 million, beating expectations but falling 56% compared to the same time last year, when both used-car prices were at record highs and prices at the rental counter were also high.
Adjusted earnings per share of 72 cents also topped a consensus analyst forecast of 64 cents a share, but below the $1.22 of a year ago.
The second quarter of 2022 makes for a tough comparison with business this year. Rental companies, including Hertz, were selling off cars to take advantage of the record pricing in the used-vehicle market, Scherr said. That kept depreciation costs anomalously low, and in some cases yielded rare profits. The vehicle sales also created a shortage of cars to rent, which pushed up pricing for travelers at the counter.
The result, Scherr said, is that the current quarter saw both depreciation rise and rental pricing fall. Hertz charged an average of $61 a day, down $7 from a year ago but still about $12 more than the industry had generally charged before the pandemic.
In recent quarters, Hertz has enjoyed a rebound toward pre-pandemic levels. Scherr said there is still room for recovery because corporate and inbound international travel have not fully returned to historic levels.
(Updates with additional details and closing share price from third paragraph.)
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