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Why is Hertz Global Holdings Inc. (HTZ) Stock down?
Hertz Global Holdings Inc. (HTZ) stock plummeted by 19.31%, primarily attributed to disappointed Q1 earning results and ongoing challenges in the electric vehicle (EV) segment.
- Disappointing First-Quarter Earnings Results: The decline in shares of HTZ followed disappointing first-quarter earnings results, where the car rental giant faced hurdles with its EV fleet. Despite a 2% year-over-year increase in revenue to $2.1 billion, surpassing estimates, Hertz encountered setbacks in its cost management. The company reported a rise in total transaction days by 9%, driven by leisure and rideshare channels, but experienced a 7% decline in retail price per day to $56.68.
- Challenges with EV Fleet: A major setback for Hertz arose from its EV fleet strategy. The company announced plans to sell 30,000 EVs, up from the initially stated 10,000, indicating a shift away from the electric vehicle market. This decision led to a $195 million vehicle depreciation charge and a 3% increase in direct operating expenses due to inflationary pressures and damage-related costs.
- Financial Impact: Hertz reported an adjusted net loss of $392 million, equivalent to a loss of $1.28 per share, contrasting sharply with the adjusted profit of $0.39 per share in the same quarter the previous year. Analysts had anticipated a loss of $0.44 per share.
Hertz Global Holdings Inc. (HTZ) stock dropped by 6.82% due to Hertz's decision to sell a portion of its electric vehicle (EV) fleet and return to gasoline-powered vehicles. This move had a negative impact on EV-related stocks like Lucid Group (LCID) and Fisker (FSR, which also experienced significant declines.
- Hertz's Shift Away from EVs: Hertz, a major vehicle rental company, announced that it plans to sell one-third of its U.S. EV fleet and reinvest in gasoline-powered vehicles. This marked a departure from Hertz's previous strategy of purchasing 100,000 Tesla vehicles in 2021. The shift resulted in a noncash charge of around $245 million for Hertz in the fourth quarter, attributed to the change in direction.
- Slow Progress in the EV Transition: Hertz initially aimed to electrify 25% of its fleet by the end of 2024 but adjusted its plans to better align with supply, demand, and profitability goals. This shift raised concerns about higher repair costs associated with EVs and the impact of an EV price war on the value of Hertz's EV fleet.
- The Road Ahead: While EV sales reached record levels in the fourth quarter, the growth rate slowed compared to previous periods. The transition from gasoline-powered vehicles to EVs was always expected to be gradual. Manufacturers are addressing challenges such as high interest rates and the return of student loan payments, which could affect young consumers looking to purchase vehicles. Despite the slower-than-expected transition, 2024 is expected to bring more EV options, leasing choices, charging infrastructure improvements, and incentives. These factors are likely to drive future EV sales growth. Investors should maintain a positive outlook for the EV industry's long-term potential.
Hertz Global Holdings Stock (HTZ) dropped by 10.67% from $10.12 to $9.04 in the trading on Thursday October 26, 2023. The reason why HTZ stock down today is due to its third-quarter results. Hertz posting in-line revenue but weaker-than-expected earnings for its third quarter of 2023. Hertz declined to provide specific forward financial guidance as it focuses on cost management and streamlining its operations.
- Quarterly revenue climbed 8% year over year to a company-record $2.703 billion.
- Net income was $230 million, or $0.70 per share. Analysts, on average, were expecting higher adjusted earnings of $0.76 per share on roughly the same revenue.
Hertz Global Holdings, Inc. (HTZ) fell over 10%, hitting the lowest level since July 2021, after Oppenheimer lowered the price target for the company.
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