02.05.2010

Hertz falls 15%

Hertz Equipment Rental has reported first quarter revenues down over 15 percent (19% without currency gains) while losses stabilise. At the same time its parent company is bullish about the car rental market following its acquisition of Dollar Thrifty.

Hertz Equipment Rentals saw its revenues decline by 15.2 percent to $237 million thanks to a smaller fleet and an eight percent fall in prices. At the same time the company posted a pre tax loss of $23.4 million, compared to a loss of $24.8 million last year.

Hertz says that its maintenance costs have also risen, as it prepares for the upswing in the market, although its fleet also aged to an average of 47 months.

During the quarter the company spent $31.9 million on new equipment, while raising $51.8 million through the sale of older equipment. It says that the industrial markets for its services improved and reached 29 percent of total revenues, its highest ever.

Hertz group chief executive Mark P. Frissora, said: "We have improved year-over-year operating performance for the third consecutive quarter, due in part to strong cost management companywide and almost 10 percent revenue growth in U.S car rental, our largest business. Our cost savings projections are on track and we have strong advanced reservation growth for the U.S. and European car rental businesses, especially during the summer peak.” “

The equipment rental business continues to be challenged, although we are experiencing improving performance in Canada and Europe, and we believe the U.S. business has begun emerging from the trough of the recession. Due to our overall positive outlook, we are revising our full year revenue and earnings guidance".

Vertikal Comment

By any measure Hertz is a major equipment rental business, however in tough times it will surely struggle against dedicated companies like United Rentals, not to mention smaller specialised operations dedicated to aerial lifts etc..

One cannot help but wonder how committed the parent is to equipment rental given its high debt load and an improving car rental business. A great deal will depend on how the next two quarters go, if by then car rental is continuing to shine, while equipment fails to pick up - surely it will be open to a take over approach?

By then there may well be some interested punters looking to pick up a bargain as the market starts to gain some momentum?