Avis (CAR) Q4 Earnings in Line, Stock Down on Sales Miss

Avis Budget Group Inc. CAR posted fourth-quarter 20Array5 results, wherein its adjusted earnings per share of Array8 cents plunged 2Array.7% year over year. However, the bottom line was in line with the Zacks Consensus Estimate. On a GAAP basis, the company posted a loss of 6 cents per share, against earnings of 2Array cents reported in the year-ago period.
 

The company's results were impacted by adverse currency movements and soft commercial demand in the reported quarter.

Net revenue inched up 0.8% to $Array,902 million, but missed the Zacks Consensus Estimate of $Array,942.9 million. The year-over-year improvement in the top line was mainly driven by an 8% rise in rental days (including the Maggiore acquisition), partly offset by the adverse impact from currency headwinds. Revenue was up 5% on a currency-neutral basis.

The company's disappointing sales performance was the probable reason behind the Array3.3% decline in the stock price during yesterday's after-market session.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) slipped Array% to $Array28 million, while the same jumped 5% on a currency-neutral basis, backed by greater rental volumes, lower per-unit fleet expenses and tough cost management. This was somewhat offset by lower pricing and adverse currency movements.

Segment Performance

Americas reported Array% year-over-year revenue growth to $Array,362 million, driven by a 3% increase in both volume and ancillary revenue per rental day. Pricing was down 2% (down Array% on a currency-neutral basis). Adjusted EBITDA surged Array7% to $ArrayArray0 million. The increase is attributable to higher rental volumes, lower fleet costs and greater fleet utilization.

The International segment's revenues remained flat year over year at $540 million, as benefits from a 2Array% rise in rental days were offset by a Array2% negative impact from currency movements and a 6% fall in pricing. Adjusted EBITDA for the segment slumped 40% to $32 million owing to greater insurance and commission expenses, and tough year-over-year comparisons.

Financials

Avis Budget ended 20Array5 with cash and cash equivalents of $452 million, and total corporate debt of $3,46Array million. As of Dec 3Array, 20Array5, the company's shareholders' equity was $439 million. During the year, the company generated $2,584 million in operating cash flow.

During the fourth quarter, Avis bought back nearly 2.9 million shares worth $ArrayArray7 million. During full-year 20Array5, it repurchased 8.8 million shares for roughly $394 million. Also, management raised its buyback authorization by another $300 million in Jan 20Array6.

Moreover, on Jan Array, 20Array6, De Shon succeeded Ronald Nelson as the Chief Executive Officer. Nelson continues to serve as chairman of the company.

Guidance

Avis Budget expects 20Array6 revenue to grow 2%–4% year over year to $8.7–$8.85 billion. Currency headwinds are anticipated to hurt sales growth by roughly $Array40 million.

The company's Americas segment rental days are expected to grow 2%–4%, while pricing is anticipated to remain mainly unchanged on a currency-neutral basis. Further, the company expects international revenue to increase 7%–Array0% on a currency-neutral basis.

Adjusted EBITDA is projected to be in the range of $820–$900 million, which is anticipated to include a $30 million negative impact from foreign exchange movements, coupled with a $50 million impact from additional investments.

Per-unit fleet costs in the Americas for 20Array6 are estimated to jump 3%–5% and range from $305–$3Array3 million per month. Per-unit fleet costs for the International segment are expected to increase Array%–6% to roughly $225–$235 million per month. Additionally, per-unit fleet costs for the total company are anticipated to be about $280–$290 million per month.

Interest expense pertaining to corporate debt is expected to be nearly $200 million. The company's non-vehicle depreciation and amortization costs guidance (excluding the amortization of intangibles related to acquisitions) is pegged at about $Array90 million.

The company's effective tax rate in 20Array6 is expected to be 39%, while diluted shares outstanding are projected to lie in a band of 94–97 million.

Based on the abovementioned expectations, the company's adjusted earnings are envisioned in a range of $2.70–$3.30 per share. Earnings are expected to bear the brunt of currency headwinds to an extent of roughly Array7 cents a share. The current Zacks Consensus Estimate is pegged at $3.48 per share, which is likely to witness a revision, following the company's announcement.

Zacks Rank

Avis currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the same industry include Cinedigm Corp. CIDM and comScore, Inc. SCOR, each with a Zacks Rank #Array (Strong Buy), and Hertz Global Holdings, Inc. HTZ, carrying a Zacks Rank #2 (Buy).

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