Performance Overview

Hertz Global’s stock price fell sharply on Tuesday following the release of disappointing first-quarter earnings, coupled with the announcement of a $250 million stock offering aimed at reducing debt. The company’s shares dropped by over 20% during early trading, ultimately closing nearly 17% lower.

Prior to the earnings call, shares had seen only a modest decline of about 3%, illustrating the market’s reaction to the unexpected results revealed after trading closed on Monday.

Financial Highlights

• Loss per Share: $1.12 adjusted versus an expected loss of $0.97.
• Automotive Revenue: $1.81 billion compared to the anticipated $2 billion.

During the earnings call, Hertz’s Chief Financial Officer Scott Haralson emphasized the necessity of the stock offering for financial restructuring. “The combination of an improved earnings profile, refinancing levers, and the ATM optionality gives us a number of alternatives for addressing upcoming maturities,” he stated.

Market Reaction and Strategic Concerns

Investor anxiety is mounting regarding Hertz’s strategy to scale back its vehicle rental offerings, which is a direct response to decreased bookings and rising auto tariffs. The company, along with other competitors, is grappling with declining consumer sentiment and reduced U.S. tourism.

CEO Gil West noted, “We prioritized fleet and cost actions at the top of the list. Cost because it moves quicker. Fleet because it’s so impactful.” This indicates a shift in focus towards operational efficiency at the potential expense of revenue generation.

Furthermore, Hertz’s revenue has declined by 13% year-over-year, largely due to an 8% reduction in fleet capacity compared to the first quarter of 2024. This reduction is part of Hertz’s “Back-to-Basics Roadmap,” which aims to optimize vehicle utilization and enhance profitability.

Future Projections

Despite the current financial challenges, Hertz has reported significant improvements in its operational costs, achieving a $92 million reduction in direct operating expenses compared to last year. The company remains committed to its long-term goals, including reducing depreciation per unit below $300 by the second quarter and achieving positive adjusted EBITDA by the third quarter of 2025.

Analysts, however, remain cautious. Barclays analyst Dan Levy remarked, “While HTZ is accelerating its transition strategy and has some benefits on depreciation, we believe the risk ahead is on demand. On balance we see the result as net negative.”