After Hertz Global Holdings, Inc (NYSE:HTZ) stock has taken a fall after a troublesome third-quarter print with gaping shortcomings in results compared to expectation and Priceline Group Inc (NASDAQ:PCLN) stock is on a steady surge after a clear outclass, analysts from Credit Suisse and Wells Fargo are weighing in on the volatile consumer players. Whereas one analyst believes these critical misses came as a rude shock that will negatively impact investor sentiment, the second analyst has subsequently lifted his price target and revised his estimates upward. Yet, both remain ultimately sidelined on these shares. Let’s take a closer look:
Hertz Global Holdings, Inc
Hertz shares were dropping close to 23% yesterday and another 6% today. Ever since Monday, November 7th, when the parent company of Hertz car rental franchises first reported bleak third-quarter earnings with significant misses across the board, investor sentiment has been at a low.
On the heels of the company’s weak print, Credit Suisse analyst Anjaneya Singh reiterates a Neutral rating on shares of HTZ with a $48 price target, which represents an 84% increase from current levels.
For the quarter, HTZ came up short with EPS of $1.58, falling under the analyst’s projection of $3.03 and the Street’s estimate of $2.73. Revenue of $2.54 billion also missed Singh’s forecast for $2.62 billion and consensus at $2.59 billion, due to soft U.S. RAC revenues coupled with international revenues. Meanwhile, adjusted EBITDA of $329 million considerably fell below Singh’s expectations for $533mm as well as the Street’s $482mm, leading to 12.9% in margins that underperformed the analyst’s estimate for 20.3% and consensus for 18.6%. From Singh’s eyes, US EBITDA margins are responsible.
HTZ management has pulled back on its guidance for the financial year of 2016 on both revenue EBITDA as well as EPS, anticipating US RAC revenue growth to fall from -2% to -3%, revising EBITDA from $850 to $950mm down to $575 to $625mm, and EPS sliced from $2.75 to $3.50 down to $0.51 to $0.88.
The analyst opines, “HTZ missed Q3 estimates by a wide margin, and pricing was not the big driver, as had been feared. While pricing missed our relatively aggressive estimate, the Q3 miss came from a number of other factors, including softer volumes, an adjustment to vehicle depreciation rate, higher operating and administrative expenses, as well as recall activity, among others. These factors led to a considerable downward revision in HTZ FY16 EBITDA (lower by ~33% at respective midpoints).”
“We expect this update to weigh heavily on shares, and believe a miss of this magnitude was largely unexpected. Furthermore, this update may cast significant doubts around the company’s go forward margin targets as had been shared last November at its analyst day,” Singh contends.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, four-star analyst Anjaneya Singh is ranked #591 out of 4,186 analysts. Singh has a 61% success rate and realizes 11.2% in his annual returns. When recommending HTZ, Singh gains 0.0% in average profits on the stock.
TipRanks analytics exhibit HTZ as a Buy. Based on 7 analysts polled in the last 3 months, 2 rate a Buy on HTZ, while 5 maintain a Hold. The 12-month average price target stands at $49.40, marking a 78% upside from where the shares last closed.
Priceline Group Inc
Priceline shares were rising close to 7% yesterday after delivering solid third-quarter financial results on Monday, November 7th, with Wells Fargo analyst Peter Stabler noting, “Supply expansion and solid execution drives another acceleration in room night growth.”
The parent company of six major brands including Booking.com, priceline.com, KAYAK, agoda.com, Rentalcars.com and OpenTable benefited from strong beats, from a 29% advance in room nights that Stabler points out “easily beat” management guidance of 18% to 23% as well as Stabler’s and the Street’s projections of 23%, “continuing a broad outperformance of closest competitor EXPE,” who scored 11% pro forma in the third quarter.
Bookings also demonstrated robust performance for the company, bringing in $18.46 billion that outclassed both the analyst’s and the Street’s expectations by 5%. PCLN reached a blended take of 18.5% in juxtaposition with the analyst’s forecast for 18.8%, with Stabler observing “acceleration of bookings exiting the quarter and a pull back on commission overrides and preferred placement participation eased a bit.” Meanwhile, fourth-quarter guidance at the midpoint denotes a “moderate” room night growth decline to 22.5%.
As for online marketing spending, Stabler anticipates “modest de-levering” on back of the company’s continued acceptance of reduced ROI swapped for “share capture” of hotel bookings. Additionally, upon assessing the company’s ‘Other’ segment including OpenTable and Kayak, the analyst discerns further significant deceleration “against a significantly easier year-ago comparison.”
However, the analyst highlights that recently, the company has considerably outclassed expectation with results and is unfazed by management’s “generally conservative” guidance.
Moving forward, Stabler places more and more importance upon PLCN”s quickly accelerating segment of alternative accommodations as a “core focus,” concluding, “We expect the race for supply growth in alternative accommodations to continue and believe PCLN’s deep experience in building global supply in the traditional hotel channel positions them to compete strongly in this segment.”
On back of the quarterly earnings release, the analyst reiterates a Market Perform on PCLN with a valuation range boosted from $1,450 to $1,470 up to $1,600 to $1,650, which represents a 1% to a close to 5% increase from where the shares last closed. For 2016, Stabler tweaks his revenue forecast from $10.61 billion to $10.69 billion, EBITDA from $4.01 billion to $4.08 billion, and non-GAAP EPS from $62.33 to $64.50. For 2017, the analyst raises revenue expectations from $12.18 billion to $12.29 billion, EBITDA from $4.63 billion to $4.67 billion and non-GAAP EPS from $70.86 to $72.10.
As usual, we like to include the analyst’s track record when reporting on new analyst notes to give a perspective on the effect it has on stock performance. According to TipRanks, five-star analyst Peter Stabler is ranked #242 out of 4,186 analysts. Stabler has a 71% success rate and garners 17.3% in his yearly returns. When suggesting PCLN, Stabler earns 0.0% in average profits on the stock.
TipRanks analytics demonstrate PCLN as a Strong Buy. Out of 20 analysts polled by TipRanks, 17 are bearish on Priceline stock and three remain sidelined. With a return potential for 10%, the stock’s consensus target price stands at $1,736.76.