Avis Budget Drives to Strong Q1 Results

Avis Budget Group, Inc. (CAR) has delivered strong results for the first quarter of 2022, as travel demand continued to pick up the pace on falling COVID-19 concerns and rising vacation trends. Shares of the car rental company gained 6.8% in Monday’s extended trade.

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Adjusted earnings of $9.99 per share reflected considerable growth from a loss of $0.46 per share in the last year’s quarter. Also, the reported figure surpassed the consensus estimate of $3.45 per share.

Revenues increased 77% year-over-year to $2.43 billion, outpacing Street estimates of $2.11 billion. The upside can be attributed to solid improvement across all key metrics. Compared to the prior-year quarter, rental days grew 45%, while revenue per day (excluding forex) jumped 24% and per-unit fleet costs tanked 68%.

At the end of the first quarter, Avis’ liquidity position was about $900 million with an additional $1.7 billion of fleet funding capacity. The company has well-laddered corporate debt and no meaningful maturities until 2024.

Notably, the company’s board approved two increases to the share repurchase program of $1 billion and $2 billion in March and May, respectively, taking the available authorization under the stock repurchase program to $2.3 billion.

Stock Rating

Responding to Avis’ solid performance, Deutsche Bank analyst Chris Woronka reiterated a Hold rating on the stock with a price target of $193, implying 31.2% downside potential to current levels.

Overall, the stock has a Moderate Sell consensus rating based on three Holds and two Sells. The Avis average price target of $207.20 implies a 26.2% downside potential to current levels.

Hedge Fund Trading Activity

TipRanks’ Hedge Fund Trading Activity tool shows that confidence of hedge funds in Avis is currently Very Negative, as the cumulative change in holdings across all eight hedge funds that were active in the last quarter was a decrease of 581,700 shares.

Final Thoughts

While the company has performed nicely in the recently reported quarter, analysts remain bearish on the stock as consumers may want to cut down on luxury costs amid such an inflationary environment.

Also, the stock currently has a beta of 2.15. Notably, beta helps measure how volatile a stock is in comparison to the market, thus the measure closer to 0 is more desirable, especially during such uncertain times. Generally speaking, a beta above 1.00 represents a high potential for volatility.

As of now, a wait-and-watch strategy is expected to help investors interested in this stock.

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