Analyst Stays Bullish On Hertz After Dismal Q2, Questions Remain

Hertz Global Holdings, Inc. HTZ shares jumped more than 18 percent on Wednesday morning despite the company reporting Q2 earnings and revenue misses. Investors weren’t the only ones that stayed bullish on Hertz following what appeared to be a lackluster quarter.

MKM Partners analyst Christopher Agnew wrote on Wednesday that Hertz’s disappointing numbers were mostly due to short-term issues, including a weak pricing environment and a spike in fleet costs. Agnew reminded investors that 2017 is a transition year for Hertz and the company is in the process of investing $300 million in restructuring, including putting $180 million into fleet, service and technology.

“We believe negative pricing and fleet cost trends bottomed in 2Q along with HTZ rebalancing and rightsizing its fleet,” Agnew wrote.

MKM maintains its Buy rating and $22 price target for the stock.

Related Link: Hertz Moving In Sympathy With Avis Budget

Deutsche Bank analyst Chris Woronka isn’t quite so bullish on Hertz, but he said Hertz appears to be only in the early innings of a multi-year recovery. Unfortunately, Woronka said the earnings call left a number of important questions unanswered.

“HTZ's 2Q results didn't meet some of the worst-case scenarios floating around and mgt confirmed that U.S. pricing is gaining momentum due to tighter fleets," Woronka wrote, "but the call tonight also highlighted some rather mysterious items: the recent triggering of an obscure IRS 'change of control' provision for tax purposes due to churn in the stock, and still no meaningful clarity on the specific 'conditions' that HTZ has determined have not been met in order for it to retire its 2019 notes with funds from the $1.25bn notes offering in June."

Until management provides more clarity on these issues, Woronka said Hertz is a difficult stock to analyze and recommend. Deutsche Bank maintains a Hold rating and $14 price target.

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