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Hertz stock tumbles as EV rental business falters, wider losses reported
Hertz Global Holdings Inc. (HTZ) faces significant losses and a sharp decline in stock prices, driven by a wider-than-expected quarterly loss and struggles with its electric vehicle rental business. The company reported a net loss of $186 million and plans to increase the sale of electric vehicles by 50%, leading to a 24% drop in share value.
Hertz Global Holdings Inc. is facing financial headwinds as the company reported a significant quarterly loss that sent its stock prices tumbling. The rental car giant disclosed troubles within its electric vehicle (EV) division, which contributed to the company's disappointing performance. In an effort to address these challenges, Hertz announced plans to sell a substantial part of its EV fleet, a decision that underscores the difficulties the company faces in this market segment.
During the reported quarter, Hertz saw a modest 2% increase in revenue, reaching $2.1 billion, a figure that slightly exceeded market expectations. This revenue bump was attributed to stronger demand in the leisure and rideshare channels, leading to a 9% rise in total transaction days. However, this positive development was offset by a 7% decline in the retail price per day for rentals, which stood at $56.68.
The financial strain on Hertz largely stemmed from costs associated with its EV fleet. The company took a $195 million vehicle depreciation charge for the EVs it plans to sell, reflecting the reduced value of these assets. Furthermore, the decision to expand its EV sale plan to 30,000 units, up from a previously announced 10,000, indicates a significant shift in strategy as Hertz aims to reduce its exposure in the electric vehicle market. This move came amid rising direct operating expenses, which increased by 3% due to inflationary pressures and damages-related expenses. Consequently, Hertz reported an adjusted net loss of $392 million, or $1.28 per share, a stark contrast to an adjusted profit per share of $0.39 in the same period the previous year, and worse than the estimated loss of $0.44 per share.
Hertz CEO Gil West acknowledged the challenges, particularly in managing the fleet and direct operating costs. He emphasized efforts to achieve an optimal supply of vehicles at an acceptable capital cost while enhancing productivity and lowering operating costs. Despite the absence of specific guidance from Hertz, there's an underlying optimism that the company might navigate through these difficulties, with its modest top-line growth being a positive indicator.
However, the immediate reaction in the stock market was a sharp 19.8% drop in Hertz's share value as of mid-afternoon, reflecting investors' concerns over the company's future. The substantial quarterly loss, coupled with the significant effort required to adjust the company's EV strategy, has led to uncertainty about Hertz's ability to recover in the near term.
In conclusion, Hertz Global Holdings Inc. finds itself in a challenging phase, grappling with issues in its EV rental business that have contributed to wider losses. The company's decision to sell a significant portion of its EV fleet highlights the difficulties in this market segment. Despite these setbacks, Hertz's leadership is focused on addressing these challenges, with the aim of steering the company back to profitability.
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