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Wednesday January 07, 2009
Hertz (HTZ): Rental returns
"Hertz Global -- the world’s largest car rental brand -- has over 8,000 locations in 144 countries. "They are #1 at airports with corporate and licensee locations in North America, Europe, Latin America, Australia and New Zealand and additional licensee operations in cities and airports in Africa, Asia and the Middle East. 
"Through Hertz Equipment Rental Corporation unit, the company operates one of the largest equipment rental businesses for a diverse line of customers ranging from major industrial companies to local contractors to consumers with over 350 branch locations in the U.S., Canada, China, France and Spain. "Weakness in the economy and tight consumer behavior has pushed shares of car rental companies down to levels which discount Armageddon. Small players like Advantage Rent A Car have recently failed and stronger companies are positioned to benefit as market share opportunities open up. "While all rental companies carry significant debt to finance large fleet purchasing, Hertz is the strongest company in the sector and reported having $4.6 billion in liquidity at the end of September. "Another advantage for HTZ is they produce 50% of their earnings through their equipment rental unit which has higher cash flow benefits than car rental. "The earliest date to meet short-term debt obligations is in 2010, a nice cushion in this tight lending environment. "With aggressive efforts to streamline operations including a 5% workforce reduction among other belt tightening measures, HTZ is positioned to bounce back strong with even a modest uptick in economic recovery. Shares traded at $16 within the last year and were as high as $26 in July of 2007. "This is a very contrarian idea to invest in the most beaten down sectors, but often this is a rewarding approach for investors who can afford to wait. Near-term earnings will not be pretty, but that factoid is already discounted in the price. "The stock made a recent all-time low of $1.55. We like the shares under $5 and have a 9 month target range of $6.75 - $8.00 and a 24 month target range of $12-16." |
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"My top pick for 2009,