Jamie Spencer
Hertz’s Disappointing Q1 Results Lead to Significant Stock Drop
Shares of Hertz Global plunged by nearly 17% on Tuesday morning following a disappointing first-quarter earnings report and the announcement of a $250 million stock offering. The stock initially dropped over 20% before stabilizing slightly by the end of the trading day.
First-Quarter Earnings Miss Analysts’ Expectations
According to the company’s quarterly earnings call, Hertz reported a larger-than-expected loss. The adjusted loss per share was $1.12, surpassing the expected loss of 97 cents per share. The company’s automotive revenue also came in below expectations at $1.81 billion, compared to the forecasted $2 billion.
$250 Million Stock Offering to Address Debt
During the call, Hertz revealed plans for a $250 million stock offering, aimed at addressing its leverage issues. CFO Scott Haralson noted that the offering, along with other refinancing strategies, would provide the company with alternatives for managing upcoming debt maturities.
Concerns Over Fleet and Reduced Car Rentals
Investors are also concerned about Hertz’s decision to reduce the number of cars available for rent, which the company attributes to lower consumer bookings and the impact of President Trump’s auto tariffs on vehicle prices. Hertz is also dealing with decreased U.S. tourism and lower overall consumer sentiment.
Revenue Declines Due to Fleet Reduction
Hertz’s revenue fell 13% year-over-year, primarily due to an 8% reduction in fleet capacity compared to Q1 of 2024. The fleet reduction is part of the company’s “Back-to-Basics Roadmap” plan, aimed at improving vehicle utilization and optimizing profits by creating greater demand than the company can satisfy.
Progress on Cost Reduction and Vehicle Sales
Despite the drop in revenue, Hertz achieved a $92 million year-over-year improvement in direct operating expenses. The company also made notable progress in vehicle sales, achieving a record quarter for sales to retail customers. Hertz’s efforts to optimize its fleet and reduce costs have helped in this area, despite the challenges posed by tariffs.
Analyst Perspective on the Outlook
Barclays analyst Dan Levy expressed concerns about demand in the future, considering the impact of reduced fleet size and market volatility. While Hertz is accelerating its transition strategy, Levy believes that the risks related to demand outweigh the benefits. He described the outlook as “net negative” despite some progress.
Hertz’s Stock Surge and Its Investor Backing
Hertz’s stock had surged by 90% earlier this year, largely driven by the involvement of Bill Ackman’s Pershing Square Capital Management, which accumulated a 19.8% stake in the company. However, the latest earnings report and stock offering have raised concerns about the company’s future trajectory.
