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Hertz forecasts upbeat revenue after profit tops on strong rental car demand

Published 02/07/2023, 07:39 AM
Updated 02/07/2023, 01:02 PM
© Reuters. Hertz car rental logo is seen in this illustration taken June 27, 2022. REUTERS/Dado Ruvic/Illustration
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By Priyamvada C

(Reuters) -Hertz Global Holdings Inc said on Tuesday it expects revenue to rise sequentially in the second and third quarters of this year on the back of strong demand for rental cars in the face of economic worries.

The company's shares rose 8% in early afternoon trading and were on course for their best day since August after Hertz said it expects revenue in the current quarter, which usually sees a seasonal dip, to remain flat compared with the fourth quarter.

"I think they were more upbeat about the revenue trajectory than I expected," Northcoast Research Partners analyst John Healy said.

The car rental industry, tied closely to airline traffic and hotel bookings, has benefited from pent-up desire to travel and explore after an easing of coronavirus restrictions even as inflation remains high.

However, Hertz's profitability had been pressured as it incurred high maintenance costs to address out-of-service levels. But executives allayed such fears on an investor call.

"We expect unit costs to move lower in Q2 and the back-half of 2023, with further reductions in 2024," Hertz Chief Executive Stephen Scherr said.

Rising costs and supply shortages faced by automakers have made it more expensive for car buyers in an uncertain economy.

Companies like Ford Motor (NYSE:F) Co and Tesla (NASDAQ:TSLA) Inc last month slashed prices on some electric vehicle models in an aggressive discounting effort to retain market share and bring more buyers to the market.

Hertz, which operates the Hertz, Dollar and Thrifty vehicle rental brands, posted an adjusted profit of 50 cents per share, beating average analyst estimate of 46 cents, as per Refinitiv data.

© Reuters. Hertz car rental logo is seen in this illustration taken June 27, 2022. REUTERS/Dado Ruvic/Illustration

"They did a good job of managing the kind of direct operating expenses to a level that was well below what we were expecting," Northcoast Research's Healy said.

Hertz's fourth-quarter revenue rose 4% to $2.04 billion.

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