2016-08-26 11:20:50 | Macquarie upbeat on Avis, more cautious on HertzMacquarie Research initiated coverage of Avis (CAR) with an Outperform rating and started coverage of Hertz (HTZ) with a Neutral rating. AVIS WELL-POSITIONED: Channel checks indicate that rental car prices are continuing to increase, and Avis is poised to benefit from that trend, according to Macquarie analyst Hamzah Mazar. The company's focus on the car rental business, along with its "solid historical...execution" and low "legacy costs" should enable it to benefit from strong industry prices, the analyst explained. Additionally, the EBITDA margins generated by Avis' Europe unit are only about 75% that of its Americas business, the analyst stated. Consequently, the company's European margins could increase, predicted Mazar. Finally, Avis' consistent, high free cash flow and low debt should result in "heightened focus on share buybacks in the near-term," stated the analyst, who set a $44 price target and an Overweight rating on the shares. HERTZ FACING HEADWINDS: Hertz's execution "needs improvement," as its prices fell eight percentage points last quarter, while those of Avis rose two percentage points, according to Mazar. About two and a half percentage points of the gap was caused by the "learning curve" of Hertz's new revenue team and corporate account losses, the analyst stated. Moreover, Hertz has a relatively high debt load, said Mazar, who set a $56 price target on the shares. PRICE ACTION: In late morning trading, Avis rose 1.75% to $36.04 while Hertz added 1% to $51.13 per share. |
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