Hertz Faces Tough Road Ahead, Analyst Says Earnings Recovery Unlikely Before 2026

JPMorgan analyst Ryan Brinkman reiterated the Underweight rating on Hertz Global Holdings, Inc HTZ on Wednesday.

Brinkman suggests that while rental car firms like Hertz may have structurally enhanced earnings through better pricing strategies and partnerships with companies such as American Express Global Business Travel, Tripadvisor, Uber and Carvana, previous forecasts likely overestimated the durability of company-specific earnings drivers.

Instead, much of the recent strength appears to have stemmed from temporary cyclical tailwinds — namely unusually low fleet depreciation and elevated pricing — which have now largely faded.

Also Read: What’s Behind Bill Ackman Buying Hertz Stock?

Although the stock may still look undervalued based on normalized earnings, Brinkman doesn’t foresee Hertz reaching those levels until after 2026.

Additionally, the company is expected to generate negative free cash flow in 2024 and 2025, limiting its ability to repurchase shares at current lower prices.

Hertz also faces high leverage, refinancing risks, and potential legal costs related to its past bankruptcy following a recent unfavorable court ruling, the analyst writes.

On Tuesday, the rental car company posted first-quarter revenue of $1.81 billion, below the $2 billion analyst consensus, representing a 13% year-over-year decline. The company also reported a first-quarter adjusted loss of $1.12 per share, versus an expected loss of 97 cents per share.

Brinkman notes that Hertz’s first-quarter fiscal 2025 results highlighted continued progress on cost efficiency initiatives, including partnerships with tech firms aimed at improving both customer experience and operational productivity.

These efforts include enhancements to its revenue management system and the deployment of AI tools for vehicle inspection and pricing optimization.

Management also reaffirmed its expectations for the progression of EBITDA through the year, the analyst writes.

HTZ Price Action: Hertz shares are trading lower by 2.88% to $5.60 at publication on Wednesday.

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