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February 25, 2010
By Shara Tibken
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Shares of Hertz Global Holdings Inc. (HTZ) dropped Wednesday after the car-rental company projected weak full-year adjusted earnings.
MKM Partners analyst Christopher Agnew said the company has called its guidance "conservative" and said results will likely be stronger in the second half of the year.
"The industry has relatively limited visibility, which might encourage the conservatism, but at the end of the day, if the economy and GDP grow 3% plus, there's likely upside to earnings through the year," Agnew said.
Hertz has seen markets stabilize after the downturn caused both businesses and consumers to slam the brakes in travel spending. The company underscored that view last week when it revealed plans to add about 150 off-airport car-rental locations and 10 equipment-rental stores this year and late Tuesday announced fourth-quarter earnings that were better than expected.
"The global economy is in the early stages of recovery, following the sharpest contractions since the great depression, but progress is uneven," Chairman and Chief Executive Mark P. Frissora said in a conference call Wednesday, according to a FactSet transcript. "Some regions of the world are already seeing a revival while others continue to struggle. The worst appears to be over for the U.S. economy."
The company said in a slideshow posted on its Web site that it expects 2010 earnings excluding items of 37 cents to 39 cents on revenue of $7.4 billion to $7.6 billion. Analysts had been looking for earnings of 51 cents and revenue of $7.43 billion.
"Overall we have taken a very conservative approach to guidance," Frissora said, adding that with the economy, it's anyones guess what could happen. "And as you know there are a lot of guesses out there."
In recent trading, Hertz shares fell 6.94% to $9.79, down nearly 20% year-to-date. Over the past 12 months, shares have nearly tripled.
Shares of Hertz and other car-rental companies have soared from their lows as people become more comfortable with an economic recovery and as demand has started to stabilize.
Late Tuesday, Hertz reported its fourth-quarter loss narrowed sharply as it got a lift from an improved U.S. car-rental market and took a much smaller hit from unusual charges.
It reported a loss of $30.9 million, or 8 cents a share, compared with a year-earlier loss of $1.22 billion, or $3.77 a share. Excluding restructuring charges, the previous year's impairment and other items, the company swung to a profit of 6 cents a share from a loss of 22 cents.
Analysts polled by Thomson Reuters projected earnings of 1 cent a share.
Revenue fell 2.7% to $1.74 billion.
Worldwide car-rental revenue rose 3.4% to $1.5 billion but fell 0.6% at constant currencies. Equipment-rental revenue plunged 26% to $274 million; the figure was down 29% adjusting for currency conversion.
Transaction days for the car-rental segment fell 1.9% on international weakness, and the rental rate per transaction day rose 1.4%. The average number of cars in Hertz's fleet dropped 1.3%.
-By Shara Tibken, Dow Jones Newswires; 212-416-2189; shara.tibken@dowjones.com