Why Shares of Hertz Crashed Today
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 car renter Hertz dropped 10% today after the company reported earnings.
So what: Third-quarter results were actually better than estimated. Revenue was up 22% to $3.07 billion, meeting expectations, and adjusted earnings per share of $0.73 were $0.02 ahead of estimates. The problem is that Simply Wheelz didn't make proper payments after acquiring Hertz's Advantage brand and is filing for bankruptcy. Hertz had to put $4 million away to cover amounts due but not made.
Now what: Management is exploring its options for recouping losses on the Advantage sale but doesn't seem optimistic. It took a $40 million charge related to the sale and the company probably isn't first in line in a bankruptcy court. I don't think this is a reason to panic today and actually view this as a buying opportunity for long-term investors. Shares trade at just nine times forward estimates and demand for rental cars is high right now.
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The article Why Shares of Hertz Crashed Today originally appeared on Fool.com.Fool contributor Travis Hoium 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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