Hertz:Quarterly Results/2022 Q4

Results

Hertz reported earnings and revenue that beat analysts' estimates by 2 cents and $2 million, respectively. Earnings benefitted from an improvement in operating performance, while revenue was driven by travel recovery. Also, Q4 benefitted from the decline in EV prices. While being interviewed by CNBC, CEO Stephen Scherr noted that business from corporate travelers grew 31% year-over-year in 2022 while international inbound travel rose 88%. According to the company, its international inbound business has been slower to recover. The other metrics that beat expectations are rate and volume. In fact, the volume performance exceeded the seasonal level by 500 basis points. Additionally, vehicle utilization rose by 100 basis points year-over-year. Growth in vehicle utilization was only observed in the international segment, which grew from 68% in 2021 to 72% in 2022. On the other hand, vehicle utilization in the American segment was constant at 80% versus 2021. Also, transaction days rose by 3% year-over-year, exceeding the seasonal expectations for a 10% reduction. In relation to airline travel cancellations that were witnessed during Christmas, Hertz's one-way rentals enable it to navigate through it and will likely give it a competitive advantage in future.

The company also gave upbeat guidance for Q1, Q2, and Q3. Seasonally, Q1 is normally less than Q4, but Hertz now expects it to be flat. For Q2 and Q3, Hertz expects revenue to rise sequentially as rates and volume increases. However, it forecasts Q4 to move down seasonally from those levels.

Already, Hertz is seeing Q4 trends in January as Business from corporate travelers is up 28% year-over-year, while international inbound travel is up 56%. Its European business is also witnessing positive trend with rate up 20% in January compared to the same month in 2021. Stephen Scherr added that independent data such as TSA figures suggest that travel is pacing well. Last Sunday TSA processed 1.7 million travellers across the US. The prior 4 sundays were steady at 1.2 million.

Revenue	$2.035 billion
Adjusted EPS	50 cents

Analyst Expectations

Revenue	$2.033 billion
Adjusted EPS	46 cents

Implications for Sixt

Which implications for Sixt can we derive from studying Hertz?

E.g. How much did rates for Hertz increase? Is the overall market growing and we can expect Sixt to profit from that as well or is Hertz taking making share?

• We don't expect the airline travel cancellations witnessed in US during Christmass to impact Sixt's revenue since it also has one-way travel.
• Demand for rental car service is high, hence Sixt will benefit from it.
• We expect Sixt to also record a huge growth in international inbound business.
• Hertz revenue didn't grow because it grap market share from the likes of Sixt but because demand for rental car service started pacing up.
• Sixt to benefit from growth in rates as Hertz noted that European business rate is up 20% in January compared to the same month in 2022.