Hertz's Shocking Slide

Hertz Global Holdings Inc. saw its shares continue their descent on Thursday, following the disclosure of its Q1 financial results. The results unveiled a larger-than-anticipated loss and an augmented strategy to divest its electric vehicles (EVs).

The company’s CEO, Gil West, linked the quarter’s performance to elevated fleet and operational costs, while reassuring investors of their efforts to address these issues. The stock experienced a 5.2% dip in premarket trading amidst ongoing market fluctuations, despite a brief 6.2% rise on Wednesday after a six-day slump that led to a record low.

In the course of the quarter, Hertz declared an expansion in its EV disposition plan, incorporating an additional 10,000 vehicles. This represents a 50% increase, with an overall target of 30,000 EV sales set for 2024. This decision resulted in a $195 million charge to depreciate the value of EVs marked for sale, on top of a $245 million charge from the previous quarter.

The financial report for the quarter ending March 31 showed a net loss of $186 million, or 61 cents per share, a stark contrast to the net income of $196 million, or 61 cents per share, from the same period the previous year. The adjusted per-share loss, which excludes nonrecurring items, came to $1.28, substantially exceeding the FactSet consensus of 45 cents.

Despite the loss, the company’s revenue saw a slight 1.6% increase, reaching $2.08 billion and surpassing the FactSet consensus of $2.04 billion. This growth was credited to a surge in demand from leisure and rideshare customer segments.

Although the revenue per transaction day (RPD) saw a 7% year-over-year decline, falling to $56.68, there were indications of recovery as the quarter advanced, with March RPD only down by 3%.

A significant factor contributing to the financial hurdles was the $588 million rise in vehicle depreciation, or $339 per vehicle. This was mainly due to revised forecasts of future residual values and disposition losses, especially for internal combustion engine vehicles. Of this increase, $119 per vehicle was associated with EVs earmarked for sale.

So far this year, Hertz’s stock has taken a 44.2% hit, surpassing the declines of its competitor, Avis Budget Group Inc., which fell by 41.7%. Meanwhile, the broader market, represented by the S&P 500, reported a gain of 6.3%.