Hertz Global Holdings, Inc. (HTZ - Get Rating) is a car rental firm that operates through company-owned, licensee, and franchisee locations under the Hertz, Dollar, and Thrifty brands. It also sells automobiles and operates the Firefly and Hertz 24/7 car sharing brands in international markets.

While its shares have gained 124.5% over the past year, the stock has plunged 31% year-to-date and 9.2% over the past month to close yesterday’s trading session at $17.24. In addition, the stock is currently trading 62.5% below its 52-week high of $46, which it hit on November 02, 2021.

Though the company has benefited immensely from the recovery in travel demand over the past few months, its poor earnings estimates make its near-term prospects look uncertain.

Here’s what could shape HTZ’s performance in the near term:

Additional Financing

In March, Hertz Vehicle Financing III LLC (HVF III), a wholly-owned, special-purpose, and a bankruptcy-remote subsidiary of The Hertz Corporation, announced the pricing of three new series of rental car asset-backed notes to be sold to unaffiliated parties: I $333,333,000 in aggregate principal amount of Series 2022-3 Rental Car Asset Backed Notes, (ii) $580,000,000 in aggregate principal amount of Series 2022-4 Rental Car Asset Backed Notes, and (iii) $317,067,000 in aggregate principal amount of Series 2022-5 Rental Car Asset Backed Notes. The net proceeds will be used to (i) repay amounts owed on HVF III’s Series 2021-A Variable Funding Rental Car Asset Backed Notes and (ii) purchase or refinance vehicles leased by THC and certain of its subsidiaries in connection with the company’s U.S. rental car fleet.

Mixed Profitability

HTZ’s trailing-12-month gross profit margin of 443% is 50.2% higher than the industry average of 29.5%. Its trailing-12-month net income margin and ROC are 14.6% and 51.6% higher than their respective industry averages. However, its trailing-12-month asset turnover ratio and ROA are 47.5% and 45.7% lower than their respective industry averages.

Weak Earnings Estimates

Street expects HTZ’s EPS to decline 53.3% in the current quarter (ending June 2022) and 17.5% in the next quarter (ending September 2022). Moreover, analysts expect its EPS to decline 19.8% in the current year. Also, its EPS is expected to decrease at the rate of 19.2% per annum over the next five years.

Discounted Valuation

In terms of forward Price/Book, the stock is currently trading at 2.01x, 16.5% lower than the industry average of 2.41x. Also, its forward non-GAAP P/E of 4.57x is 70.3% lower than the industry average of 15.42x. Moreover, HTZ’s forward Price/Sales of 0.73x is 40.7% lower than the industry average of 1.23x.

POWR Ratings Reflect Uncertainty

HTZ has an overall C rating, which equates to a Neutral in our proprietary POWR Ratings system. The POWR ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. HTZ has a D grade for Stability and a C for Quality. The Stability grades exhibit the company’s higher volatility than its peers. In addition, its mixed profitability is consistent with the Quality grade.

Of the 24 stocks in the B-rated Auto Dealers & Rentals industry, HTZ is ranked #18.

Beyond what I’ve stated above, you can view HTZ ratings for Growth, Value, Momentum, and Sentiment here.

Bottom Line

HTZ is currently trading below its 50-day and 200-day moving averages of $20.19 and $21.74, respectively, indicating a downtrend. Moreover, it could continue retreating in the near term based on its mixed financials and poor analysts’ earnings estimates. So, we think investors should wait before scooping up its shares.

How Does Hertz Global Holdings Inc. (HTZ) Stack Up Against its Peers?

While HTZ has an overall C rating, one might want to consider its industry peer, Rush Enterprises Inc. (RUSHA - Get Rating), Penske Automotive Group Inc. (PAG - Get Rating), and PT Astra International (PTAIY - Get Rating), which has an overall A (Strong Buy) rating.

HTZ shares were trading at $17.86 per share on Thursday morning, down $0.25 (-1.38%). Year-to-date, HTZ has declined -28.53%, versus a -22.55% rise in the benchmark S&P 500 index during the same period.

About the Author: Pragya Pandey

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More...

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