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Why Is Hertz (HTZ) Up 1.7% Since Last Earnings Report?

It has been about a month since the last earnings report for Hertz (HTZ). Shares have added about 1.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Hertz due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Earnings & Revenues Beat at Hertz Global in Q3

Hertz Global performed impressively in the third quarter of 2018, reporting better-than-expected earnings and revenues.

The company’s earnings came in at $2.14 per share (excluding 46 cents from non-recurring items), which surpassed the Zacks Consensus Estimate of $1.78. The bottom line also increased significantly on a year-over-year basis. Results were aided by higher revenues.

Quarterly revenues of $2.76 billion outpaced the Zacks Consensus Estimate of $2.64 billion and improved 7.2% on a year-over-year basis. Strength across majority of the segments drove the top line.

Segmental Performance

In the quarter under review, the U.S. Rental Car segment generated revenues of $1,852 million, up 10% year over year. The improvement can be attributed to increased volumes and pricing both on and off airport.

Vehicle utilization improved 30 basis points to 81% on the back of efficient fleet management. Excluding fleet dedicated to transportation network companies ("TNC") rentals, revenues increased 8%. In third-quarter 2018, direct vehicle operating and selling, general and administrative costs (as a % of total segmental revenues) increased to 65% from 63% a year ago.

The International Rental Car segment generated revenues of $732 million, up 1% year over year (3% excluding foreign currency impact). Total revenue per transaction day (RPD) rose3%.

Segmental direct vehicle operating and selling, general and administrative costs (as a % of total segmental revenues) increased to 61% from 60% a year ago. Revenues from all other operations improved 9% to $174 million.

Balance Sheet and Cash Flow

Hertz Global exited third-quarter 2018 with cash and cash equivalents of $761 million compared with $1,072 million at the end of 2017. Restricted cash at the end of the quarter was $265 million compared with $432 million at the end of 2017.

As of Sep 30, 2018, total debt amounted to $17,158 million compared with $14,865 million as of Dec 31, 2017. Cash flows provided by operating activitiesfor the first nine months of the year totaled $2,017 million compared with $1,977 million in the year-ago comparable period.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 14.95% due to these changes.

VGM Scores

At this time, Hertz has a great Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Hertz has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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