After strong second quarter, Estero-based rental car giant Hertz sees more growth ahead
Hertz continues to see high demand for its rental cars.
That drove strong results for the second quarter, with revenue up 4% over the year, with a strong start to the summer season.
On Thursday, parent company Hertz Global Holdings, based in Estero, reported quarterly revenue of almost $2.44 billion, up from about $2.34 billion a year ago.
While revenue rose, it didn't quite meet Wall Street's expectations. On average, analysts expected revenue of $2.45 billion, according to Yahoo Finance.
The car rental giant beat on earnings, however.
Adjusted net income, or earnings, came in at $227 million, or 72 cents a share. That topped estimates by 8 cents.
The quarter was marked by strong demand and high utilization of the rental fleet – trends that Hertz sees continuing through the second half of the year – and into 2024.
Rental volume grew by 12% in the quarter, with fleet size up 9% over the year.
"Demand was strong in the U.S., Canada and Europe, as each of leisure, corporate and rideshare, continue to demonstrate momentum, with international travel benefiting both our U.S. and European businesses," said Stephen Scherr, Hertz's chairman and CEO, in a webcast with analysts.
He expects an uptick in both demand and rental rates in the third quarter, based on what he's seen in July.
"Maintaining high utilization allows us to command better pricing and therefore produce higher revenue per unit and higher margin in the business," Scherr said.
The company held an average of 560,000 vehicles in the second quarter.
Hertz continues to look for ways to cut costs. In the second quarter, the company reduced corporate overhead by $30 million annually, through "attrition and reduction in force," Scherr said.
He did not elaborate on the number of jobs, or employees cut.
"Despite these reductions, we have work to do on cost. Going forward, we will continue to focus on key controllable cost items," he said, as a way to "drive productivity, offset inflationary cost pressures and fund growth-related investments."
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A rosy outlook
In an interview with the "Squawk Box" on CNBC, Scherr shared his outlook for the rest of the year is even more positive.
"What we are seeing is just continued strength in demand," he said. "And it's not just here in the U.S. It's equally in Europe."
He attributed the stronger demand, in large part, to a "greater confidence among consumers," and talks of "disinflation," or the rate of inflation falling, in the U.S.
The surge in demand doesn't appear "momentary," nor driven by "revenge" coming out of the COVID-19 pandemic, any longer, Scherr said.
After the pandemic eased, so did travel restrictions in the U.S. and abroad, resulting in a phenomenon known as "revenge travel," with vacation-starved travelers looking to make up for lost time.
"There is something that appears a bit more permanent to this," Scherr said of recent trends. "We are seeing it across many of the airlines. And I think there is more to come."
There's room for improvement, with international and business travel not yet back to their pre-pandemic levels, he noted.
"There's more to come, in terms of what's available to us," Scherr said.
Looking ahead, Scherr sees stability in the company's "base business," with opportunities for growth. Those opportunities include increasing rentals to rideshare drivers and growing demand for its value brands Dollar and Thrifty.
In February, Hertz announced a revamp of its Dollar and Thrifty brands, now under way. The market for more budget-friendly rentals is very large and addressable, Scherr said.
On another front, growth in Hertz's European business continues, following a restructuring, which cut costs and improved efficiency.
"All of our countries in Europe are proving profitable and there is considerable business to be had there," Scherr said.
'Electrification' remains a focus
Hertz continues to focus on electrification, and on growing interest and demand in its electric fleet. Earlier this month, it launched a Hertz Let's Go Electric promotion in the U.S., offering customers one day of free rental when they rent an electric vehicle for at least two days, through Labor Day.
The company is also hosting test-drive events to generate more interest in its electric fleet around the country.
Hertz now has tens of thousands of electric vehicles available for rent at more than 2,000 locations across 44 states in the U.S. In addition to offering the cars to travelers, Hertz also provides them to rideshare drivers through a partnership with Uber. Nearly 50,000 Uber drivers have rented them so far, through what equates to a subscription service, which has recently expanded to Europe.
Electric vehicles now make up about 12% of Hertz's total fleet, mostly made up of Teslas at this point.
In a company statement, Scherr said: "Our focus on asset returns continues to yield tangible results, enabling us to advance the growth of our rideshare business and the revitalization of the Dollar brand, in addition to facilitating ongoing investments in technology and electrification."
Hertz completed its move to Estero in 2016 after building a new world headquarters.
The company has locations in more than 150 countries, across North America, Europe, Latin America, Asia, Australia, Africa, the Middle East and New Zealand. It ranks as the world's largest on-airport general use car rental company, with more than 1,600 airport locations in the U.S., and more than 1,300 internationally.
This article originally appeared on Naples Daily News: Hertz sees growth ahead, with strong demand and pricing for its cars
