Hertz Unit Extends Pact with Govt. Cooperative - Analyst Blog

A unit of Hertz Global Holdings Inc. HTZ, Hertz Equipment Rental Corporation, yesterday announced the extension of its ongoing 5-year collaboration with the U.S. Communities Government Purchasing Alliance with the signing of a new 3-year contract.

Under this contract, Hertz will provide the enrolled users access to equipment rental products and solutions, including innovative programs and services. This contract takes Hertz Equipment Rental's experience of over 30 years of working with government agencies a step ahead, thus enabling the company to provide low-cost solutions to meet regular and specific equipment rental needs to more than 55,000 enrolled U.S. Communities participating agencies.

The contract came to Hertz Equipment Rental following a competitive tender process that was held by the lead public agency and Advisory Board member of U.S. Communities, North Carolina State University.

U.S. Communities is a leading national government purchasing cooperative that provides procurement resources and solutions to local and state government agencies, school districts (K-12), higher education institutions, and nonprofit organizations. The cooperative leverages the purchasing power of over 90,000 government agencies across the country.

Last month, Hertz communicated the spin-off of its construction equipment rental business, thus dividing the company into two independent, publicly traded companies. The first company will retain Hertz's car rental businesses comprising Hertz, Dollar, Thrifty and Firefly as well as its fleet leasing services division called Donlen. The second company emerging from the separation will be named ‘Hertz Equipment Rental Corporation' or ‘HERC' and will comprise the company's equipment rental business.

The spin-off is expected to improve the financial profiles of both companies, ensuring stabilized earnings as well as higher returns on capital. Further, it will help improve management focus on each of the separated businesses, which enjoy a leading position in their respective markets.

Hertz as an independent car rental company (post spin-off) will operate from nearly 11,555 rental locations throughout North America, Europe, Latin America, Asia, Australia, Africa, the Middle East and New Zealand, marking the biggest car renting network across the globe.

On the other hand, the newly formed HERC will be positioned as the world's leading and most diversified equipment leasing business. Operating through a network of 335 branches in the United States, Canada, France, Spain, China and Saudi Arabia, as well as through international franchisees, the company generated annual revenues of more than $1.5 billion in fiscal 2013.

Quoting a similar transaction, Sears Holdings Corp. SHLD recently reached the final stages of its previously announced spin-off of Lands' End. Slated to complete the spin-off on Apr 4, 2014, the company will be divided into two companies, Sears Holdings Corp., retaining the same ticker symbol and Lands' End Inc. with a new ticker symbol “LE”.

Other Stocks to Consider

Hertz currently holds a Zacks Rank #4 (Sell). Better-performing stocks in the business services industry include SouFun Holdings Ltd. SFUN and Rentrak Corporation RENT. While SouFun Holdings has a Zacks Rank #1 (Strong Buy), Rentrak carries a Zacks Rank #2 (Buy).