Avis Budget (CAR) is set to report Q2 earnings tonight after the close with a conference call to follow tomorrow morning at 8:30am ET. CAR reported Q1 results at 4:15pm. Current Capital IQ consensus stands at EPS of

Shares of CAR have had a solid run since reporting Q1 results in early May. The co missed its EPS by 22 cents but revenues were in line and, most importantly, it guided FY16 revenue above the consensus. The primary driver, and what attracted investors, was commentary from the company that it was starting to see a turn around in the pricing environment for the troubled car rental business.

This stock fell from the $50 area in October of 2015 all the way to $22. So the recent upward trend allowed the stock to recapture approx 55% of its losses. But we are seeing the stock under pressure today as it has given up nearly 5% ahead of today's report. Shares are down approx 12% over the past week. This suggests that investors remain cautious on the name and are taking profits after buying low.

CAR will need to show a continued improvement in pricing to entice more investors into the name. It does have some solid support below at the 200-sma ($31.90) and the $33-34 area which both linger just below. Also we would keep an eye on Hertz (HTZ) which will trade closely with CAR on the news.

Key Metrics

  • Pricing- CAR expects it to decline 1% in FY16. Pricing in Q1 declined by 5% so investors are looking for a deceleration in the price decline.
  • Rental Days- FY16 guidance is for this to increase 2-4%. Rental Days increased by a healthy 8% in Q1.
  • Per Unit Fleet Costs- Expected to be $280-290 per month in 2016. This figure ran hot in Q1 as it came in at $312 per month, up 6% y/y.


  • Co expects FY16 EPS in the range of $2.70-3.30, excluding non-recurring items, vs. then-$2.97 Capital IQ Consensus Estimate. Revenue is expected to come in the range of $8.75-8.90 bln which was an upgrade from the prior outlook of $8.70-8.85 bln vs. then-$8.7 bln Capital IQ Consensus.
  • Car reaffirmed its FY16 EBITDA expectations of $820-900 mln.
  • The Company also expects that it will generate $450 to $500 million of free cash flow in 2016, and that it will repurchase $300 to $400 million of common stock in 2016.

Q1 Recap

  • CAR reported Q1 (Mar) loss of $0.28 per share, excluding non-recurring items, $0.22 worse than the Capital IQ Consensus of ($0.06). Revenues rose 1.7% year/year to $1.88 bln vs the $1.88 bln Capital IQ Consensus, +3% in constant currency, primarily due to an 8% increase in rental days (5% excluding the acquisition of Maggiore).
  • First quarter Adjusted EBITDA was $44 million.
  • Results benefited from increased rental volumes, offset by reduced pricing, higher per-unit fleet costs and a $33 million negative impact from currency movements, including losses on currency hedges.


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