Hertz (HTZ) Inks Deal With Localiza, Growth Efforts On Track

Keeping pace with its efforts to drive business via collaborations, Hertz Global Holdings, Inc. (NYSE:HTZ) entered a strategic deal with South America’s biggest car rental firm Localiza, which is a leading name in the Brazilian market.

The deal is likely to benefit both the companies, as it includes several aspects like co-branding in Brazil, leveraging Localiza in other markets, customer referrals and exchange of technology and knowhow.

As part of customer referrals, Hertz will get reservations for customers of Localiza traveling outside South America. In fact, Hertz will also advertise Localiza in key U.S. airports, which serve Brazilian passengers. Likewise, Hertz travelers to Brazil will be referred to Localiza, with the latter providing enhanced services, wider access and larger fleet, under the brand “Localiza Hertz”.

Further, per the deal, Localiza will buy Hertz’s Brazilian business for approximately R$337 million, though the final price will be known only when the transaction is concluded. Also, until the closure of the deal, which is subject to the Brazilian antitrust authority’s sanction, both the companies will operate independently.

Notably, this partnership, which will combine Hertz’s and Localiza’s business expertise, superb services and innovations, is likely to strengthen Hertz’s existing network and attract new customers. Also, this marks another step in Hertz’s path of extending its reach to new markets.

The company undertook a similar action in July, when it announced the launch of its Hertz Green Collection, commonly known as Green Traveler Collection, in Mexico. The popularity and success of this eco-friendly option in other countries actually encouraged Hertz to extend its reach, with expectations of it being similarly welcomed in Mexico as well. These actions highlight the company’s focus on spreading its reach to augment business.

While shares of the company gained 2.2% following the news, this Zacks Rank #4 (Sell) stock has a dismal price performance history, which is well evident from its underperformance of the Zacks categorized Transportation – Services industry. Evidently, Hertz has crashed 50.7% ever since its separation from its equipment rental business, compared with the industry’s growth of 10.2%.

Further, the company released its third-quarter 2016 results last month, wherein both sales and earnings declined year over year and lagged the Zacks Consensus Estimate. Moreover, management substantially slashed its earnings outlook for 2016, due to persistent weakness in the company’s car rental business.

Nonetheless, better ranked stocks worth considering in the Transportation sector include SkyWest, Inc. (NASDAQ:SKYW) , with a Zacks Rank #1 (Strong Buy), Marten Transport, Ltd. (NASDAQ:MRTN) and FedEx Corporation (NYSE:FDX) , each with a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

SkyWest has an average positive earnings surprise of 35.9% in the trailing four quarters, and the company has seen positive estimate revisions in the last 30 days.

Marten Transport has topped earnings consecutively in the last three quarters. Moreover, the company’s positive estimate revisions over the past 60 days bode well.

FedEx Corporation’s long-term earnings per share (EPS) growth rate of 13.4% and solid positive estimate revisions over the past 30 days help it stand strong in the industry. Moreover, the company has delivered positive surprises in the last four quarters, with an average beat of 3.9%.

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