Hertz to sell 10,000 more EVs than planned, and stock suffers record plunge

By Tomi Kilgore

Rental car company swings to a much wider-than-expected loss

Shares of Hertz Global Holdings Inc. resumed their selloff on Thursday, after the rental car company reported a much wider-than-expected first-quarter loss, and significantly expanded its plan to sell off its electric vehicles.

"Our quarterly results were unacceptable and reflected the impact of a decline in forward residual values used to determine vehicle depreciation, coupled with our EV rationalization and elevated cost structure," said new Chief Executive Gil West on the post-earnings call with analysts, according to an AlphaSense transcript.

The stock (HTZ) plunged 21.3% in morning trading. That put it on track for a record-low close, and the biggest one-day selloff since it started trading in its current form in July 2021, after emerging from bankruptcy.

The company said sold about 10,000 EVs during the quarter, as part of its previously announced plan to sell off 20,000 EVs.

"Given this progress, we increased the EV disposal plan by another 10,000 units, bringing the combined reduction to 30,000 vehicles, which we expect to complete by the end of the year," said Chief Operating Officer Justin Keppy.

A $195 million charge was booked during the quarter to write down the EVs held for sale, which remained in inventory at the end of the quarter. That was on top of a $245 million charge recorded in the fourth quarter.

For the quarter to March 31, the company swung to a net loss of $186 million, or 61 cents a share, from net income of $196 million, or 61 cents a share, in the same period a year ago.

Excluding nonrecurring items, such as a favorable income tax provision, the adjusted per-share loss of $1.28 compared with the FactSet loss consensus of 45 cents.

Meanwhile, revenue grew 1.6% to $2.08 billion to beat the FactSet consensus of $2.04 billion, amid increased demand in leisure and rideshare customer channels.

While revenue per transaction day (RPD) fell 7% from a year ago to $56.68, results improved as the quarter progressed, with RPD for March down just 3%.

On a bright note, CEO West said that overall demand for travel remains strong and RPD remains well above pre-COVID levels.

"Our revenue performance is not fully capturing the opportunity that is available to us," West said.

Vehicle depreciation for the quarter increased by $588 million, or $339 on a per-vehicle basis, due to the deterioration in estimates of forward residual values and disposition losses on internal-combustion-engine vehicles compared with gains last year. Basically, used car prices have dropped over the last 12 months while new vehicle capital costs have only recently moderated.

Of the $339 per-vehicle increase, $119 was related to EVs held for sale.

Hertz's stock has plunged 56.1% year to date, while shares of rival Avis Budget Group Inc. (CAR) have dropped 45.9% and the S&P 500 has gained 4.9%.

-Tomi Kilgore

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04-25-24 1110ET

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