Why Hertz Shares Are Getting Halved

Shares of Hertz Global Holdings Inc. (NYSE: HTZ) were cut in half on Tuesday after the company missed earnings in its most recent report. Hertz reported its third-quarter financial results after the markets closed on Monday. Although earnings did not live up to expectations, what really hurt in this report was the guidance.

The company posted $1.58 in earnings per share (EPS) and $2.54 billion in revenue, compared with the consensus estimates from Thomson Reuters of $2.75 in EPS and revenue of $2.6 billion. The same period of last year reportedly had EPS of $0.49 and $2.98 billion in revenue.

Total U.S. Rent a Car revenues were $1.7 billion in the third quarter 2016, a decrease of 2% from the same period last year. Transaction days increased by 1% while pricing, as measured by total rentals per day, decreased by 3% year over year.

In terms of the guidance for the full year, the company expects EPS in the range of $0.51 to $0.88 and adjusted EBITDA between $575 million and $625 million. The consensus estimates call for $2.94 in EPS and $8.98 billion in revenue for 2016. Essentially, the company is looking to post a sizable loss in the fourth quarter.

During the third quarter, the company repurchased roughly 2 million shares of its common stock at an aggregate purchase price of $100 million under its previously disclosed share repurchase program.

On the books, Hertz cash and cash equivalents totaled $1.43 billion at the end of the quarter, up from $474 million at the end of 2015.

John Tague, president and CEO of Hertz, commented:

We are making progress in foundational aspects of our long-term business improvement plan, implementing new systems, improving customer service levels and launching new products. However, our near-term financial performance continues to be uneven.  A customary vehicle depreciation rate review near the close of the third quarter resulted in a substantial depreciation adjustment, particularly on compact and mid-sized vehicles, that together with rental volume at the low end of our expectations as well as higher net operating and administrative expenses impacted our performance.

Shares of Hertz were last seen down about 47% at $18.90 on Tuesday, with a consensus analyst price target of $61.38 and a 52-week trading range of $6.95 to $53.14.