Shares of car rental giant Hertz (HTZ) are rising today after CEO Mark Frissora announced that he is stepping down. Brian MacDonald, the President and CEO of Hertz Equipment Rental will be taking Frissora’s place soon.
Does this executive shake-up affect my rating for HTZ?
Company Profile
Hertz is the owner of The Hertz Corp., the world’s largest car rental brand. With 11,555 locations in 145 countries (under the names of Hertz, Dollar, Thrifty and Firefly), Hertz has a presence in most major airports.
Hertz is also responsible for one of the world’s largest equipment rental services, with 340 unique branches scattered across North America, Europe and Asia. Last year, Hertz brought in over $10.7 billion in total sales and $346 million in profit.
Earnings Rundown
Last month, HTZ took a beating after it withdrew its financial forecasts and hinted that it could delay the sale of its equipment-rental business. To add insult to injury, Hertz revealed that it needed to review its earnings for the past three years. So, in the past month we’ve seen significant downgrades to analyst earnings-per-share estimates.
The earnings estimate of the most recent quarter plunged from $0.08 to $0.06 per share — the new estimate represents a 71% year-over-year plunge in earnings. For fiscal year 2014, the consensus estimate has fallen from $1.8 to $1.5 per share — as it stands, 2014 EPS is expected to be 8% lower than 2013.
Meanwhile, sales growth is expected to be in the low single digits. I just don’t see anything that justifies buying HTZ shares on the dip, because the rental company has a bumpy road ahead of it in terms of sales and earnings growth.
Current Ratings
Over the past 12 months, HTZ has declined in terms of both fundamental strength and buying pressure. On the fundamentals side, HTZ earned an “A” for return on equity and a “B” for operating margin growth. As for the other six fundamental metrics I graded it on, HTZ barely squeaked by with “Cs” on sales growth, earnings growth and earnings surprises, and it failed on earnings momentum, analyst earnings revisions and cash flow. So, HTZ earns a “C” for its Fundamental Grade.
Additionally, institutional interest for HTZ has waned. So, HTZ stock earned a “D” for its Quantitative Grade. Overall, I consider HTZ a “D-rated sell.”
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
