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Business Observer Friday, Mar. 16, 2018 6 months ago

Hertz continues to miss earning targets

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Hertz has some new hurdles to jump.
by: Business Observer Staff Writer

The Wall Street blogger/media/investor crowd — not a bunch known for its patience — is hammering Hertz.

The Estero-based rental car company, with a $1.71 billion market capitalization, remains a leader in the industry, at least when measuring fleet size. But a string of disappointing earnings quarters, accounting issues and changes in upper management have dented the company's image and wrecked its share value. And the Uber and Lyft ride-sharing led industry disruption continues to bite away at the company's traditional airport-based model.

Headlines of recent posts that track the company include: “Hertz Global Holdings is a Train Wreck,” on Valuewalk.com March 12; “Will Carl Icahn Win his Bet on Hertz as Well?” on Seeking Alpha March 5; and “Hertz Faces Bigger-Than-Expected Loss as Fix-It Costs Rise,” on Bloomberg Feb. 27, the day it posted 2017 fourth-quarter earnings.

Hertz, in that earnings release, posted a loss of 77 cents per share — 15 cents worse than the 62-cents-a-share loss analysts projected. The company's “return to the red in the fourth quarter after a single period of profitability signals it still has work to do to pull off its ambitious turnaround plan,” writes Bloomberg.

Others weren't as generous.

David Trainer, in his ValueWalk post, calls the Hertz stock a danger zone for investors. “This company has an alarming number of red flags,” he writes. “Its shrinking cash flows can't cover its debt burden, its accounting is confusing and possibly unreliable, its industry faces technological disruption and its valuation assumes implausibly high profit growth.”

Adds Trainer: “Investors in Hertz are hoping for a turnaround, but so far there's been no sign profits are stabilizing, much less returning to growth.”

On Seeking Alpha, blogger Aristofanis Papadatos focuses on the company's “extremely negative free cash flows.”

Papadatos also refers to billionaire investor Carl Icahn, who owns 35% of Hertz's shares, and approved of the hiring of the current CEO, Kathryn Marinello. Icahn recently won a big battle for the future of wellness company Herbalife, but Papadatos says Hertz might not see the same result.

“While Carl Icahn is undoubtedly an exceptional investor,” writes Papadatos, “I advise investors not to follow him blindly in his bet on Hertz.”

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