Must-know update: Why did Appaloosa exit Hertz Global Holdings?
Hertz Global Holdings, Inc. (HTZ) was a 0.53% position that was eliminated last quarter by Appaloosa. The position was initiated in 2Q 2013.
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Car rental stocks rallied last year, mainly due to increasing demand for rental cars in the business and leisure sectors. The segment also saw a consolidation in 2013, with Hertz rival Avis Budget Group (CAR) buying Zipcar and Payless Car Rental, while Hertz acquired Dollar Thrifty.
For 3Q 2013, Hertz reported worldwide revenues of $3.1 billion, an increase of 22.0% year-over-year but profits fell 12% from a year ago. U.S. car rental revenues for the quarter increased 32.6% primarily due to Dollar Thrifty, which the company acquired on November 19, 2012. International car rental revenue grew 9.7%. Revenues from worldwide equipment rental for the third quarter were $401.8 million, up 10.7% year-over-year.
In terms of outlook for equipment rental, Hertz expects continued year-over-year price and volume improvement. In Europe, for 4Q13, volume and pricing trends remain positive. But efficiency is expected to be impacted by an additional 26,000 recalled vehicles, as well as the excess fleet. The company said its 2013 transition efforts will continue into 2014, but fleet efficiencies will gradually improve as Dollar Thrifty fleet synergies come onstream. The board approved a share repurchase program of up to $300 million on the back of weakness in the stock and the exceptional growth outlook.
MKM Partners analyst stated the catalysts in 2014 for HTZ included a robust free cash flow and share repurchase initiatives, activist shareholder involvement, price increases, and integration of the Dollar Thrifty fleet. The stock was up almost 70% in 2013.