Hertz shares surge despite Q2 miss

Shares of Hertz Global Holdings, Inc. (NYSE: HTZ) surged more than 18 percent to $17 on Wednesday morning despite the company posting loses in the second quarter.

Hertz reported a loss of $158 million, or $1.90 per share, compared with a loss of $43 million, or 33 cents a share, in the year-ago period. Adjusted for one-time items, the company reported a net loss of $52 million, or 63 cents a share, in the quarter, versus a net income of $35 million, or 41 cents a share, in the same period last year. Total revenues for the second quarter reached $2.2 billion, compared with $2.3 billion in the second quarter 2016. Analysts polled by FactSet had expected an adjusted per-share loss of 20 cents on sales of $2.2 billion.

CEO and president Kathryn V. Marinello said on an earnings call, "It's going to be another solid six quarters of hard work and investments," said Marinello. She said the company is now playing catch-up from multiple years of neglect, such as not updating the fleet or getting the right cars in the right place. "There nothing structural that Hertz can't return to."

"We have made significant progress in the first half of the year, executing on our operating turnaround plan," said Marinello. "Of course, the hard work always comes before the pay off as reflected in our second quarter results, where increased spending to fix areas of weakness and invest in areas of opportunity were exacerbated by a challenging vehicle residual environment in the U.S."

Analysts and investors agree with the CEO and are remaining bullish on the stock. According to Benzinga, MKM Partners analyst Christopher Agnew wrote 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.

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