Hertz Global missed earnings forecasts today and offered disappointing guidance. It’s time to buy the stock, says MKM Partners.
MKM analysts Christopher Agnew and Bradford Dalinka explain why their recommendation isn’t as contrarian as it appears:
Contradictory? We think not: (1) Expectations weren't high into the quarter. Guidance was expected to be conservative and although a little light, the top-end includes $2.00. (2) The issues in 4Q in our view are transitory (DTG integration/over-fleeting related) and will pass in 2Q14. [Hertz Global] expects fleet to be rightsized by the end of 1Q, which is a positive. (3) Industry fundamentals are robust (note peer Avis Budget’s (CAR) results and guidance. (4) The [Hertz Equipment Rental Corp.] spin is a clear positive and, although expected, the details are better than expected, particularly share repurchase.
The timing of Hertz’s decision to spinoff HERC–so soon after United Rentals’ (URI) acquisition of National Pump–surely caught some analysts by surprise but should be the big catalyst, Barron’s Teresa Rivas noted yesterday.
Shares of Hertz Global have gained 1.2% to $27.55 at 1:16 p.m., while Avis Budget Group has jumped 2.9% to $48.25 and United Rentals has advanced 0.5% to $91.34.
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