Hertz’s stock reverses losses to trade up 8% as execs talk up return to profitability

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Hertz Global Holdings Inc.’s stock reversed early losses to trade up 8% on Tuesday, as executives on the company’s earnings call outlined plans to return to profitability after a bigger-than-expected fourth-quarter loss.

As expected, Estero, Fla.-based Hertz
HTZ,
+8.16%

booked $245 million of charges relating to plans to reduce its electric-vehicle fleet, a move it had announced in January.

On a call with analysts, Chief Executive Stephen Scherr said his core message for analysts was one of confidence going forward.

“Our confidence is based on the continued stability of the demand and rate environment,” he told analysts, according to a FactSet transcript.

All indications from travel companies and airlines are that the travel recovery is intact with consumers still apparently displaying a preference for experiences over things, he said. And with interest rates expected to come down in 2024, that trend should hold up.

“The expected benefits of the strategic decision that we made in the fourth quarter regarding our EV fleet is also expected to reduce operational distraction. And (there’s) the continued execution of our enhanced profitability plan,” he said.

Hertz swung to a loss of $348 million, or $1.14 a share, for the quarter, after income of $116 million, or a loss of 1 cent a share, in the year-earlier period. The company’s adjusted per-share loss came to $1.36, wider than the $1.05 loss per-share FactSet consensus.

Revenue rose to $2.184 billion from $2.035 billion, just ahead of the $2.154 billion FactSet consensus.

The company said in January it planned to sell about 20,000 electric vehicles from its fleet, or about one-third of the total, in another sign that the EV revolution is stalling amid weak demand from consumers.

The move is aimed at better balancing supply and expected demand for EVs, allowing the car-rental company to scrap a disproportionate number of lower-margin rentals and reduce damage expenses associated with EVs.

EVs require special tools and parts and specialist knowledge to repair after a crash, more so than traditional gas-powered vehicles. The company had elevated collision and damage costs in the quarter, Scherr said.

Hertz announced plans to buy 100,000 Teslas
TSLA,
+0.95%

in 2021 to expand its EV Fleet.

Hertz is also planning to create profitable incremental revenue streams and will grow ride share and improve its European and value brand businesses, said Scherr.

Uber
UBER,
+1.43%

drivers have now driven over 1 billion miles in EVs rented from Hertz, with revenue from ride-share up 75% in 2023 from the prior year, he said.

Other cost cuts include shrinking the company’s off-airport real-estate footprint by exiting unprofitable locations, said Justin Keppy, the company’s recently installed chief operating officer who has just completed his first 90 days at the company.

Hertz is expecting to redeploy more than 10,000 vehicles to more profitable locations starting in the current quarter.

See now: Hertz’s stock gets downgraded, and Tesla has a lot to do with it

Hertz is also planning to tackle operating costs and target collision, damage, maintenance, transportation, fuel and out-of-service expenses. It will roll out new digital tools that aim to improve visibility and decision-making for drivers.

It also has plans to lower procurement costs and modernize its tech infrastructure, moving to the cloud and retiring legacy software platforms, he said. In all, it expects to achieve $250 million in benefit from productivity improvements.

Read also: Is buying a used Tesla from Hertz a good deal? Here’s what you should know.

The stock fell 7% in premarket trade, sending it to the lowest levels seen since the company emerged from bankruptcy in 2021, before staging a strong rebound during the call.

The company’s two traded bonds, meanwhile, saw net selling early in the day as prices fell by up to two points. The following chart from data solutions provider BondCliQ Media Services shows the move.

Active Hertz Corp. bonds: One-week price performance.


BondCliQ Media Services

The bonds sold off early in the day before buyers emerged midmorning. The move means the 2029 bonds are now yielding just over 10%.

Hertz Corp. net customer flow (Intraday).


BondCliq Media Services

The bonds mature in 2026 and 2029.

Outstanding Hertz Corp. debt (USD) by maturity year.


BondCliQ Media Services

The stock has fallen 50% in the last 12 months, while the S&P 500
SPX,
-0.02%

has gained 20%.



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