Why Hertz Shares Crashed

Why Hertz Shares Crashed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Hertz Global Holdings plummeted 12% today after the car rental company lowered its full-year guidance.

So what: Hertz has soared over the past year on better-than-expected profit and sales growth, but a downbeat view for the rest of the year is forcing analysts to lower their expectations. Management said that weaker-than-expected volume in the U.S. airport car rental market -- its biggest business -- is starting to cause issues like lower utilization and pricing pressure for its excess vehicles, suggesting that the company's margins will likely slip in upcoming quarters.

Now what: Management now sees full-year adjusted EPS of $1.68-$1.78 on revenue of $10.8 billion-$10.9 billion, down from a prior view of $1.78-$1.88 and $10.85 billion-$10.95 billion. "Despite these challenges, we anticipate Hertz will nevertheless generate record earnings for the full year, with adjusted pre-tax income up more than 30% year-over-year," Chairman and CEO Mark Frissora reassured investors. "Additionally, we are encouraged by the strong, ongoing performance of several of our businesses." Of course, given that the stock is still up 75% from its 52-week lows even with today's pullback, I'd hold out for an even wider margin of safety before buying into that optimism.

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Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool owns shares of Hertz Global Holdings. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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