BancAmerica Robertson Stephens Initiates Coverage of Hertz Corporation
28 October 1997
BancAmerica Robertson Stephens Initiates Coverage of Hertz Corporation
SAN FRANCISCO, Oct. 28 -- BancAmerica Robertson Stephens
research analyst Jordan Hymowitz initiated coverage today on Hertz Corporation
(HRZ) with a Buy rating.
According to Hymowitz, "the rental car industry is emerging as a stand-
alone profitable business in the U.S. after years of being owned by the auto
manufacturers and used as a dumping ground for their excess manufacturing
capacity. All rental car companies are raising prices, better utilizing their
fleets and consolidating their smaller brethren. The earnings leverage from
the auto rental industry's transformation is huge -- every incremental $1
increase in daily rental car prices will add roughly $0.35 per share to Hertz'
EPS. Our price target is $45 per share, or 29.5% above current price levels."
"Hertz is the most profitable and perhaps the best-managed company in the
rental car industry. Unlike its competitors, Hertz has made money every year
since 1918 and reported an industry-leading pretax margin of 5.8% in 1996
(versus an average of approximately 3.4% for its competitors)," added
Hymowitz.
"In our view, Hertz Corp. is the largest rental car company in the world,
with $3.7 billion in global revenue in 1996 and a 30% on-airport car rental
market share in the U.S. and in Europe. The company's mix between business
and leisure car rentals is 50%/50%, and approximately 27% of Hertz' car rental
revenue is generated outside the U.S., predominantly in Europe," stated
Hymowitz.
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