Hertz profit beats estimates, but warns of higher spending; shares jump


Hertz Global on Thursday reported a better-than-expect net profit as higher revenues and revenue management offset canceled reservations in hurricane-impacted parts of the United States, but the car rental company warned it was entering a period of weak demand amid high investment.

The company’s shares rose 12 percent in after-market trading following the results.

Hertz’s shares fell nearly 17 percent earlier this week after rival Avis Budget Group Inc lowered its full-year earnings forecast citing the impact of hurricanes Harvey, Irma and Maria.

Doubts about over-capacity and industry pricing have weighed on the rental car companies’ shares, as have concerns that off-lease cars are flooding the used-car market. The rise of car-sharing companies also make some investors wary.

Revenue for the quarter rose 1 percent versus the same period in 2016, but rental car revenue in the United States fell 1 percent despite higher pricing.

Hertz said it had made progress in its turnaround plan, including reducing the size of its rental fleet.

“We are entering a seasonally low period of demand at the same time that we are continuing to invest in the long-term growth of the company,” Chief Executive Officer Kathryn Marinello said in a statement. “Expense always precedes benefit.”

“Higher spending levels throughout 2018 are necessary to ensure predictable, sustainable earnings performance, beginning in 2019,” she added.

Estero, Florida-based Hertz reported third-quarter net income of $93 million, or $1.12 per share, up from $42 million, or 52 cents per share, a year earlier.

Excluding one-time items, the company reported earnings of $1.42 per share.

Analysts on that basis had expected earnings per share of $1.35.

In after-market trading Hertz shares were up more than 12 percent at $22.48.

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