Hertz Lowers Earnings Growth Estimates for 2000 and 2001 - Continues to Expect Record Earnings for the Two Years
The Hertz Corporation
In its revised outlook, the Company estimates net income per share to be $1.30 in the Third Quarter and $0.51 in the Fourth Quarter of 2000, respectively $0.13 and $0.12 per share below analysts' estimates for these periods, and expects net income per share for the full year 2000 to be $3.30. The Company also expects the First Quarter of 2001 will be weaker than the comparable period in the prior year, but believes it will experience low, single-digit net income growth for the full year 2001.
Craig R. Koch, President and Chief Executive Officer, said, "we are disappointed that we will not meet our income targets for 2000 and 2001, but we are on track to achieve record earnings for the seventh and eighth consecutive years. Achieving stronger earnings growth will depend, primarily, on modest price increases in the car and equipment rental segments. Over the long term, we believe there is strong growth potential in our businesses and opportunities to further reduce our cost base."
The Company noted that competitive conditions did not support its Third Quarter initiative to raise U.S. discretionary prices in car rental and that pricing in the commercial market, particularly for large accounts, remains very competitive. The lack of price increases in the car rental segment has been accompanied by lower than anticipated car rental volume growth. The Company believes that the United Airlines labor dispute and severe weather-related airport disruptions affected volume growth. In the North American equipment rental market, downward pricing pressure continues, resulting from a general excess of fleet across the industry.
Hertz also attributed its revised outlook for net income to other, secondary, factors that affect both its worldwide vehicle rental and leasing and worldwide industrial and construction equipment rental segments. These factors include wage inflation, higher interest on debt used to finance vehicles and equipment, unfavorable foreign exchange rates and higher costs related to vehicle acquisitions. Also contributing to the revised outlook are inflation in facilities and advertising costs, along with the costs of additional investments in systems and the consolidation of European financial processing in Dublin, Ireland. The Company believes its results will not be materially affected by the recently announced Firestone tire recall.
Projected revenue growth in the U.S. car rental business remains solid at about 8% for the Third Quarter and 7% for the Fourth Quarter of 2000, compared with the same periods in 1999. For the company's international car rental operations, revenue growth before the effect of foreign exchange is expected to be about 8% each quarter year-over-year.
These revenue assumptions are based on the following estimates. Consolidated Airport Revenue Transaction Revenue Per Day Days Per Day U.S. Car Rental Q3 - 2000 <1%> - flat + 8% - 9% <0.5%> - + 0.5% Q4 - 2000 <1%> - flat + 7% - 8% <0.5%> - + 0.5% International Car Rental Q3 - 2000 <1%> - flat * + 8% - 9% Q4 - 2000 <1%> - flat * + 8% - 9% * Before the effect of foreign exchange
Revenue growth in the equipment rental segment has been revised downward slightly to 11-13% year-over-year, due to lower than expected peak season demand and a general slowdown in construction activity. The Company also noted weakening used equipment resale prices. The Company expects a mid-single digit full year 2000 pre-tax margin in this segment.
The Company is implementing a number of measures to reduce costs, including trimming its North American car and equipment rental fleets, temporarily slowing suburban car rental and equipment rental expansion plans and rationalizing staff levels to reflect current conditions.
Hertz is expected to announce actual Third Quarter revenue and net income on October 13 before the opening of trading.
Headquartered in Park Ridge, New Jersey, Hertz operates from approximately 6,500 locations in the U.S. and over 140 foreign countries.
This press release is based on preliminary financial results, which are subject to further review and adjustment, and contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on current expectations, forecasts and assumptions and involve risks and uncertainties, some of which are outside of the Company's control, that could cause actual outcomes and results to differ materially from current expectations. These risks and uncertainties include, among other things, price and product competition, changes in general economic and business conditions, wage inflation, economic and competitive conditions in markets and countries where the Company's customers reside and where the Company and its licensees operate, changes in capital availability or cost, costs and other terms related to the acquisition and disposition of automobiles and equipment, and certain regulatory and environmental matters. These forward-looking statements represent the Company's judgments as of the date of this release. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
SOURCE: Hertz Corporation
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