Hertz Reveals Weak Q1 Earnings; ‘Going Concern’ Update

Car rental firm Hertz Global Holdings (HTZ) has reported disappointing first quarter earning results with Q1 Non-GAAP EPS of -$1.78 missing Street expectations by $0.59. Meanwhile revenue of $1.92B dropped 9% year-over-year and fell short of consensus estimates by $70M.

Most notably, the filing also stated “management has concluded there is substantial doubt regarding the Company’s ability to continue as a going concern within one year from the issuance date of this Quarterly Report on Form 10-Q.” Shares are currently trading down 4% in Tuesday’s pre-market.

“We started the year with positive momentum, extending the strong growth trajectory of the past three years,” said CEO Kathryn V. Marinello. “Yet in just two months, the outbreak of the coronavirus created a major business disruption as global travel demand dropped to almost zero and the U.S. used-car market effectively shut down.”

Following the earnings report, Deutsche Bank’s Chris Woronka wrote: “It’s been widely reported that HTZ is evaluating a host of options that could bolster the company’s liquidity.”

He notes that HTZ previously reported that it missed a key payment related to its ABS facility on April 27 and also did not make the payment by the end of the cure period (May 4).

“HTZ subsequently received waivers from various lender parties until May 22–at such time as which we believe it will become clearer as to whether the company has a viable path to maintaining normalized operations or whether a larger restructuring of some sort might be required” says Woronka.

The analyst reiterated his hold rating on the stock with a $9 price target on May 12. In the last couple of months three analysts have downgraded Hertz from hold to sell, with a further analyst downgrading the stock to hold. Overall, this gives Hertz a bearish Moderate Sell analyst consensus.

With shares trading down 80% on a year-to-date basis, the average analyst price target indicates 158% upside potential from the current share price.(See Hertz stock analysis on TipRanks).

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