Market Overview

Dollar Thrifty Earnings Preview: Q1 EPS Expected to Double

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Dollar Thrifty Automotive Group (NYSE: DTG), the auto rental provider that is still being pursued by Hertz (NYSE: HTZ), is scheduled to report its first-quarter 2012 results tomorrow, May 9, after the closing bell.

In the previous report, the CEO said, "During 2011, we benefited from a robust used vehicle market, a recovering travel market with increasing demand for value-oriented product offerings, and our ongoing focus on expense control and productivity initiatives." But oil prices, and therefore gasoline prices, have surged in the first quarter, prompting many travelers to stay home.

Expectations

Analysts on average predict that Dollar Thrifty will say that per-share earnings more than doubled from a year ago to $1.30. That estimate is nine cents higher than it was 60 days ago. And note that Dollar Thrifty trounced consensus EPS estimates in the previous two quarters and has not fallen short of expectations in the past four. But first-quarter revenue is forecast to have risen just 2.5% from the same period of last year to total $355.5 million.

Looking back to the fourth quarter, profit rose more than twofold to $33.9 million, or $1.08 a share. That exceeded analyst expectations. Revenue rose 1.3% year over year to $353.7 million for the quarter. Dollar Thrifty attributed results in part to robust demand for used cars that boosted the resale values of its vehicles and lowered the company's costs.

Looking ahead, analysts so far expect to see sequential and year-over-year growth of revenues in the current quarter, but EPS that have slipped a couple of pennies the first-quarter estimate. At this point, the full-year forecast calls for EPS that are 4.3% higher than in the previous year, as well as revenue up 3.2%.

See also: Dollar Thrifty Automotive Group Ups 2012 Guidance

The Company

Dollar Thrifty Automotive Group provides daily rental of vehicles to business and leisure customers at more than 580 locations in the United States and Canada. It also sells vehicle rental franchises worldwide and operates a franchised retail used car sales network. The company is headquartered in Tulsa, Okla., was founded in 1989, and now has a market cap of $2.3 billion.

Competitors include Avis Budget Group (NASDAQ: CAR) and Hertz Global Holdings (NYSE: HTZ), both of which have attempted to acquire Dollar Thrifty in the past couple of years. Avis posted an acquisition-related net loss earlier this week, but a better-than-expected adjusted profit, and offered upbeat guidance. Last week, Hertz reported a narrower net loss and raised its full-year outlook.

See also: Avis Budget Posts Q1 Results, Issues 2012 Forecast

During the three months that ended in March, Dollar Thrifty completed a $100 million stock repurchase program, and the company also extended a shareholder rights plan intended to deter any unsanctioned attempts to take over the company.

See also: Dollar Thrifty Automotive Group Extends Shareholder Rights Plan

Performance

Dollar Thrifty has a long-term earnings per share growth forecast of 40.0% and a return on equity of 27.8%. The operating margin is higher than the industry average. The P/E ratio is 15.9 and the PEG ratio is 0.4. But short interest is a hefty 15.9% of the float. All but one of the five analysts polled who follow the stock recommend holding shares. Their price targets range from $80 to $86 per share.

The stock has faced resistance at $82 since mid March. At $81.52, the share price is about 16% higher than at the beginning of the year. It is above both the 200-day and 50-day moving averages. Over the past six months, the stock has outperformed Avis Budget and the broader markets, but it has underperformed Hertz.

ACTION ITEMS

Bullish: Investors interested in exchange traded funds invested in Dollar Thrifty might want to consider the following trades:

  • PowerShares Dynamic Retail (NYSE: PMR) is more than 17% higher year to date.
  • ProShares Ultra Russell 2000 (NYSE: UWM) is more than 14% higher year to date.
  • SPDR S&P Transportation (NYSE: XTN) is more than 12% higher year to date.
  • PowerShares Dynamic Market (NYSE: PWC) is more than 11% higher year to date.
Bearish:

Traders may prefer to consider these alternative positions in the rental and leasing industry:

  • United Rentals (NYSE: URI) is up more than 44% year to date.
  • TAL International Group (NYSE: TAL) is up more than 35% year to date.
  • RSC Holdings (NYSE: RRR) is up more than 28% year to date.
Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.
 

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