- Hertz spins off its conglomerate services.
- Outcomes of the spin off.
- Hertz has profitable financials and why now is a good time to invest.
Hertz (NYSE:HTZ) is planning on separating its conglomerate of leasing and renting cars and equipment. According to HTZ this spin-off will "create a stronger growth profile and more competitive position for each company with enhanced management focus, resources and processes that are more directly aligned with each business's unique strategic priorities." This tax-free spin-off forecasted to take effect in Q1 of 2015 will separate HTZ's current services into two publicly traded companies:
The following diagram illustrates the implications of the spin off:
Tourism is not only important for vehicle rental businesses but also for the nation's residents. The following studies were done by Bureau of Labor Statistics, U.S. Travel Association, Oxford Economics, & UNWO:
Unfortunately, the United States does not generate as much revenue from tourism relative to other nations around the world. Although HTZ is slightly affected by these numbers, being a global provider helps offset these negative headwinds. United States education and security, however, can benefit more if tourism increases.
Fortunately, American auto-rental companies do not entirely depend on tourism. The industry has actually seen a drastic increase in revenue over the past ten years:
HTZ being one of the largest providers for this service has benefited tremendously financially from these positive headwinds:
Q4 Financials (Est. Nearest 1/10th & 1/100th)
Revenue in USD billion
Total Operating Expenses in USD billion
Operating Income in USD billion
Net Income in USD billion
Basic EPS in USD
There is a reason the company has received awards like: Travel & Leisure's 2013 World's Best Awards, Frequent Business Travelers Globe Runner Awards, and Executive Traveler's Leading Edge Awards. Aside from the $4 billion increase in revenue over the past 6 years, HTZ's total assets are almost $3 billion > than its total liabilities. The company's free cash flow has increased by nearly $10 billion since 2008. During this same 6-year period, capital expenditure has reduced by $8 billion and operating cash flow has increased by $1 billion. Even though CEO compensation has increased by 2% since last year, investors have also benefited TTM:
- Stock Return +76%
- Revenue +9%
- ROE +26%
- Net Income > than +35%
Conclusion: When is a good time to buy?
Looking at %K (15) Stochastic & RSI (14), shares are currently being sold more than bought. However, with share prices hovering around EMA (50) in the middle of BBands © support and resistance bars, I'd say right now is a good time to cash in. Taking advantage of current share price might be better than waiting until the company executes its $1 billion share re-purchase plan.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.