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Is Avis A Buy Now?

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Avis Budget Group Inc. (NASDAQ: CAR) reported broadly in-line 4Q results, while announcing its 2016 guidance short of consensus expectations.

The company reported adj. EPS of $0.18, ahead of the Street's $0.17, mainly on account of lower interest expense. Americas pricing declined about 1 percent, while volumes grew 2.8 percent, resulting in in-line results. International missed expectations due to currency headwinds and lower pricing.

Avis guided to revenue of $8.7-$8.85bn, versus consensus expectation of $8.77bn. The company projected EBITDA of $820-900mm and EPS of $2.70-$3.30, short of consensus expectations of $930mm and $3.43, respectively.

Credit Suisse

Analyst Anjaneya Singh maintained an Outperform rating for the company, with a price target of $44. He expects a “rather negative reaction” to the company’s 4Q15 update, mainly on account of the top-end of FY16 EBITDA and EPS guidance missing consensus expectations.

Singh said the most surprising aspect was the weak volume guidance of merely 2-4 percent in the Americas, despite relatively easy comps. He added, “While weaker commercial volume trends have been the "norm" for the past few quarters, the outlook seems a bit weak even taking that into account.”

Deutsche Bank

Deutsche Bank’s Chris Woronka maintained a Buy rating for the company, with a price target of $48.

Woronka wrote, “Whether the company has adopted a different philosophy with respect to guidance under new CEO Larry De Shon is difficult to gauge at this point and it’s also worth mentioning that at this stage in the year, there is little visibility into how the demand picture will play out over the seasonally significant summer months.”

The analyst added that bears are likely to highlight the guidance as justifying their views. He added, however, that the stock’s trading performance over the past few months serve as an indication that “buy-side expectations had already been reset in a meaningful way.”

Barclays

Barclays’ Brian A. Johnson maintained an Equal-Weight rating for Avis, while reducing the price target from $35 to $29. He mentioned that while shares had plunged 27 percent due to disappointing 2016 guidance, the company’s fundamentals were in-line.

Although the stock had become cheaper, the Equal-Weight rating reflects “little near-term upside,” Johnson said. He elaborated that upside was limited by lack of near-term opportunity for upward earnings revisions and lack of any clear catalysts over the coming months, while pricing is likely to continue to be soft in 1Q.

“With soft margins, unclear what drives earnings growth. Share buybacks are likely to support EPS growth. Yet with investment expense to recur over the next few years, the case for margin expansion is limited. And with only modest revenue growth, it supports only modest EBITDA growth over the next few years,” Johnson added.

Citi

Analyst Manish A. Somaiya maintained a Neutral rating for the company. “Post results, CAR equity was down ~12% with bonds indicated ~3pts lower but we reiterate our Neutral stance on CAR Sr Nts. given current valuations.”

He recommended investing in Hertz Global Holdings Inc (NYSE: HTZ) [Rated: Buy] on weakness. He said that the expected spin-off of H.E.R.C. Products Incorporated (OTCMKTS: HERC) was a “company-specific positive catalyst.”

Latest Ratings for CAR

DateFirmActionFromTo
Feb 2020Northcoast ResearchDowngradesBuyNeutral
Oct 2019Deutsche BankDowngradesBuyHold
Feb 2019Goldman SachsUpgradesSellBuy

View More Analyst Ratings for CAR
View the Latest Analyst Ratings

Posted-In: Anjaneya Singh BarclaysAnalyst Color Long Ideas Price Target Reiteration Analyst Ratings Trading Ideas

 

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