Hertz Investors Feel The Pain Of Outsized Q3 Miss

Shares of Hertz Global Holdings, Inc HTZ came crashing down to a new 52-week low of $17.20 on Tuesday after an outsized miss in its third quarter results. Even though the stock rebounded above $23 per share by early afternoon, it was still trading lower by around 35 percent from Monday's close.

Hamzah Mazari of Macquarie commented in a report that while he was expecting a miss in Hertz's results, the company's earnings report was much worse than expected.

Specifically, Hertz earned $1.58 per share in the quarter, which fell well short of the analyst's estimate of $2.77 per share and Adjusted EBITDA of $329 million was also notably short of the $469 million expected.

In addition, Hertz's US RAC net deprecation per unit/month of 14 percent exceeded the analyst's estimate of a 10 percent increase. Finally, US vehicle utilization was 60 basis points lower year-over-year, which also fell well short of the analyst's projections of a 50 basis point gain.

Feeling The Pain

Mazari noted that while Hertz's management believes it's on track to remove $350 million of costs in 2016, the company fell short from a timing perspective. The analyst believes the company is using a buffer on cost takeout as potential offsets to lower residual values and other factors outside of management's control.

Finally, the analyst stated that his 2016 and 2017 estimates are under review but he can lower Hertz's price target (and reaffirm a Neutral rating) to $33 from a previous $42 given the company's execution issues around pricing and visibility into cost takeout.