Can Avis' (CAR) Initiatives Help Revive Its Stock Price?

Avis Budget Group Inc. (NASDAQ:CAR) , a global car rental company, is witnessing a low phase as the company’s stock price has declined about 18% in one year and is down 4.2% year to date. The impact of foreign currency fluctuations besides unfavorable pricing and high fleet costs are reasons behind this Zacks Rank #5 (Strong Sell) company’s doom.

Avis Budget continues to face hurdles like high fleet costs and lower pricing. Evidently, both the Americas and International segment revenues were adversely affected by lower pricing to an extent of 5% (on a currency neutral basis) in first-quarter 2016. This, along with higher fleet expenses and foreign currency headwinds, also weighed on the company’s earnings and earnings before interest, taxes, depreciation and amortization (EBITDA), which slumped 62% in the quarter.

Further, management expects 2016 to witness an increase in fleet costs, for both the Americas and International segments, thus causing a threat to EBITDA. Additionally, the company’s significant presence in the international market exposes it to foreign currency headwinds, which are expected to continue posing hurdles in 2016, though it is anticipated to have a lesser effect now.

Avis Budget has seen a downtrend in estimates since it posted an adjusted loss for first-quarter 2016, wider than the Zacks Consensus Estimate and in sharp contrast to the year-ago earnings figure. Moreover, the top line lagged expectations for the seventh straight quarter. Results were mainly hampered by lower pricing, foreign currency headwinds and seasonal factors – which usually lead to soft first-quarter outcome.

Nonetheless, the company’s expansion strategy has been moving in full swing via alliances, acquisitions and joint ventures. Also, we commend Avis’ focus on expanding its Budget brand, taking its multi-brand strategy to the next level. Sustained productivity growth, several pricing initiatives and potential revenue-generating synergies from its acquisitions also bode well.

While we note that this New Jersey-based car rental giant has been persistently implementing disciplined pricing initiatives in order to offset the rising fleet costs, we would wait to see more pronounced results on this front before turning optimistic.

Zacks Rank

Better-ranked stocks in the business services industry include Core-Mark Holding Company Inc. (NASDAQ:CORE) , WageWorks Inc. (NYSE:WAGE) and Sajan Inc. (NASDAQ:SAJA) , each holding a Zacks Rank #2 (Buy).


AVIS BUDGET GRP (CAR): Free Stock Analysis Report

SAJAN INC (SAJA): Free Stock Analysis Report

CORE-MARK HLDG (CORE): Free Stock Analysis Report

WAGEWORKS INC (WAGE): Free Stock Analysis Report

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