Car and equipment rental provider Hertz Global Holdings, Inc. (HTZ) reported Thursday a profit for the third quarter that soared from last year on lower expenses, due to the company's expense management initiatives, despite a 15.7% revenue drop. However, adjusted earnings per share was down two cents, but topped analysts' expectations by seven cents. The company also recently raised its earnings and revenue forecast for the full year 2009.
Commenting on the results, chairman and chief executive officer, Mark Frissora said, "Our strong earnings performance in the third quarter reflects sustained progress on expense management and incremental revenue-generating initiatives which are offsetting soft, but improving, business travel demand and stabilizing equipment rental volume."
The Park Ridge, New Jersey-based company posted net income of $64.5 million or $0.15 per share for the third quarter, higher than $17.7 million or $0.05 per share in the prior-year quarter.
Excluding non-recurring items, adjusted net income for the quarter was $124.5 million or $0.31 per share, compared to $106.0 million or $0.33 per share in the year-ago quarter. On average, five analysts polled by Thomson Reuters expected the company to report earnings of $0.24 per share for the third quarter. Analysts' estimates typically exclude special items.
Worldwide revenues for the quarter declined 15.7% to $2.04 billion from $2.42 billion in the same quarter last year. Revenues declined 13.4% on a constant currency. Global Car Rental revenues decreased 11.5% or 8.9% on constant currency, to $1.76 billion from the year-ago quarter's $1.99 billion. The worldwide average number of company-operated cars during the third quarter was 445,200, down 9.3% over the prior-year quarter. However, revenues for worldwide equipment rental dropped 35.2% or 33.9% on constant currency, to $280.5 million from $433.1 million in the prior-year quarter.
Total expenses for the third quarter were $1.97 billion or 96.3% of revenues, lower than $2.40 billion or 96.3% of revenues, in the year-ago quarter, including direct operating expenses of $1.12 billion, lower than $1.35 billion in the prior-year quarter.
In order to overcome the prevailing global economic slowdown and the declining volumes in global car and equipment rental markets, the company in January initiated programs to further decrease costs by reducing employee headcount by about 4,000. The company expects to save $150 million to $170 million in 2009.
For the nine-month period, Hertz posted a net loss of $95.1 million or $0.27 per share, compared to net income of $11.2 million or $0.03 per share reported in the prior-year period.
Excluding non-recurring items, adjusted net income for the period plunged to $94.0 million or $0.23 per share from $208.8 million or $0.64 per share in the year-ago period.
Total worldwide revenues for the year-year-to-date period dropped to $5.36 billion from $6.74 billion posted in the same period last year. "As the global economy recovers, we expect our balanced approach to revenue growth, costs and cash management will result in continued improvement in key financial metrics," Frissora added.
Earlier, Hertz suspended its financial guidance, and said it was not in a position to meet its annual earnings target, citing reduced demand, lower pricing and residual market conditions on profitability. Due to continued volatility in car and equipment rental markets, the company said it remains unable to provide specific quarterly or full year 2009 revenue, earnings and cash flow guidance.
However, the company provided earnings and revenue forecast for the second quarter and the full year 2009 in June and backed its fiscal 2009 guidance while reporting second quarter results back in late July.
On Monday, Hertz raised its revenue and earnings guidance for full year 2009, citing favorable third quarter performance and improving macro outlook for the fourth quarter of 2009. The company said it currently anticipates adjusted earnings for the full year 2009 in a range of $0.21 to $0.23 per share, up from the prior guidance of $0.12 to $0.15 per share. Analyst expect the company to report earnings of $0.20 per share for fiscal 2009.
The company also raised its fiscal 2009 revenue forecast to between $7.0 billion and $7.1 billion from its previously announced guidance of $6.7 billion to $7.0 billion. The Street is currently looking for full year revenues of $6.96 billion.
HTZ closed Thursday's regular trading session at $9.54, up $0.42 or 4.61% on a volume of 4.73 million shares, higher than the three-month average volume of 3.64 million shares.
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