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Hertz defies predictions with 21% earnings gain
HERTZ Global Holdings Inc, the second-biggest rental-car company in the United States, lost almost half its market value this year on speculation that higher gasoline and airline-ticket prices would curtail earnings.
They haven't so far at Hertz - even though Avis Budget Group Inc and Dollar Thrifty Automotive Group Inc are seeing lower numbers. Hertz's net income probably rose 21 percent in the second quarter, based on the average analyst estimate compiled by Bloomberg News.
Reservations are also up through September, according to Chief Executive Officer Mark Frissora.
For Hertz, the profit gain stems from a 2006 decision to accelerate a push into a US$10 billion market it abandoned 30 years ago to closely held Enterprise Rent-A-Car Co, the biggest US rental-car company by sales.
The segment, known as off-airport, is made up of accident-replacement vehicles, and leisure and business rentals unrelated to air travel.
'One of the most common misconceptions is that Hertz is exposed only to cyclical industries,' said Connor Browne, managing director of Thornburg Investment Management Inc, Hertz's third-largest outside investor, with 17.8 million shares as of March 31.
'They have a number of growth opportunities in more stable areas.'
Off-airport is dominated by Enterprise, which controls about three quarters of the market.
Strong push
Hertz has pushed into the leader's stronghold by building a network of strip mall locations at the rate of almost one a day since 2006.
To penetrate the accident-replacement business, New Jersey-based Hertz has established relationships with 184 of the top 200 auto insurers. The company had 40 such dealings before the push.
'We doubled the size of our sales force and started spending a lot more money on promotional activity locally,' Frissora, 52, told Bloomberg News.
Hertz's current off-airport revenue of about US$1 billion should double in the next three years, Frissora said.
His long-term goal is for the segment to become half of Hertz's business.
Customers are renting cars for different reasons than they have historically, which has led to growth in the off-airport market, Enterprise spokeswoman Christy Conrad said.
They include reducing wear on an owner's vehicle, saving money on gasoline, or in the case of a minivan, making trips more comfortable for passengers, she said.
They haven't so far at Hertz - even though Avis Budget Group Inc and Dollar Thrifty Automotive Group Inc are seeing lower numbers. Hertz's net income probably rose 21 percent in the second quarter, based on the average analyst estimate compiled by Bloomberg News.
Reservations are also up through September, according to Chief Executive Officer Mark Frissora.
For Hertz, the profit gain stems from a 2006 decision to accelerate a push into a US$10 billion market it abandoned 30 years ago to closely held Enterprise Rent-A-Car Co, the biggest US rental-car company by sales.
The segment, known as off-airport, is made up of accident-replacement vehicles, and leisure and business rentals unrelated to air travel.
'One of the most common misconceptions is that Hertz is exposed only to cyclical industries,' said Connor Browne, managing director of Thornburg Investment Management Inc, Hertz's third-largest outside investor, with 17.8 million shares as of March 31.
'They have a number of growth opportunities in more stable areas.'
Off-airport is dominated by Enterprise, which controls about three quarters of the market.
Strong push
Hertz has pushed into the leader's stronghold by building a network of strip mall locations at the rate of almost one a day since 2006.
To penetrate the accident-replacement business, New Jersey-based Hertz has established relationships with 184 of the top 200 auto insurers. The company had 40 such dealings before the push.
'We doubled the size of our sales force and started spending a lot more money on promotional activity locally,' Frissora, 52, told Bloomberg News.
Hertz's current off-airport revenue of about US$1 billion should double in the next three years, Frissora said.
His long-term goal is for the segment to become half of Hertz's business.
Customers are renting cars for different reasons than they have historically, which has led to growth in the off-airport market, Enterprise spokeswoman Christy Conrad said.
They include reducing wear on an owner's vehicle, saving money on gasoline, or in the case of a minivan, making trips more comfortable for passengers, she said.
