Hertz Faces Tough Road Ahead: High Fleet Costs, Liquidity Concerns Trigger Downgrades
Portfolio Pulse from Shivani Kumaresan
Hertz Global Holdings, Inc (NASDAQ:HRZ) reported a modest sales growth of 1.6% in Q1 FY24 but missed EPS estimates significantly, leading to downgrades from Goldman Sachs and BofA Securities due to high fleet costs and liquidity concerns. Goldman Sachs cut its price target from $7 to $4, citing concerns over Hertz's ability to meet its First Lien Covenant and liquidity requirements. BofA Securities downgraded Hertz to Underperform and reduced its price target from $9 to $3, highlighting the impact of declining used vehicle prices and rising interest costs on Hertz's earnings recovery. Morgan Stanley maintained an Equal-weight rating with a $9 price target. Hertz's stock is also part of the iShares Core S&P Mid-Cap ETF (NYSE:IJH) and Invesco S&P MidCap 400 Pure Value ETF (NYSE:RFV), which could be indirectly affected.
April 26, 2024 | 8:23 pm
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NEGATIVE IMPACT
Hertz reported lower than expected Q1 FY24 earnings, leading to downgrades and reduced price targets from analysts due to high fleet costs and liquidity concerns.
The significant miss on EPS estimates and the subsequent downgrades by major financial analysts highlight serious concerns about Hertz's financial health and operational challenges. The reduction in price targets by Goldman Sachs and BofA Securities reflects a bearish outlook on the stock, primarily due to high fleet costs and liquidity issues. These factors are likely to pressure the stock price in the short term.
CONFIDENCE 90
IMPORTANCE 95
RELEVANCE 100
NEGATIVE IMPACT
Hertz is part of the iShares Core S&P Mid-Cap ETF (IJH) portfolio, and its stock performance could indirectly affect the ETF's value.
Given that Hertz is included in the iShares Core S&P Mid-Cap ETF (IJH), the negative performance and outlook for Hertz could indirectly affect the overall performance of the ETF. However, the impact may be moderated by the diversified nature of the ETF's holdings.
CONFIDENCE 75
IMPORTANCE 60
RELEVANCE 50
NEGATIVE IMPACT
Hertz's stock is also included in the Invesco S&P MidCap 400 Pure Value ETF (RFV), potentially impacting the ETF's performance.
As Hertz is a part of the Invesco S&P MidCap 400 Pure Value ETF (RFV), the negative developments surrounding Hertz's financial performance and analyst downgrades could indirectly influence RFV's performance. The effect is likely to be limited due to the ETF's diversified portfolio.
CONFIDENCE 75
IMPORTANCE 60
RELEVANCE 50