Shares of Hertz Global Holdings (NASDAQ: HTZ) tumbled nearly 28% on Wednesday, hitting $3.62 in midday trading, after the rental-car company warned that its second-quarter core profit would fall near the low end of its previous guidance. The sharp decline—the worst single-day percentage drop since April 2025—was driven by escalating losses from used-vehicle sales, which have pushed monthly depreciation costs to roughly $300 per unit.
Used-Car Market Weighs on Earnings
Hertz said that while fleet size, revenue, revenue per rental day, and rental days are expected to meet or slightly exceed its earlier projections, the used-car segment has become a significant drag. After posting gains in April, May saw a reversal, with losses from vehicle sales now on track to push net depreciation per unit per month to approximately $300. This metric reflects the monthly value decline of each rental car, adjusted for any gains or losses on sales.
The company now anticipates adjusted corporate EBITDA in the range of $50 million to $80 million for the second quarter. These figures are preliminary, unaudited, and subject to change as the quarter concludes. Adjusted corporate EBITDA excludes interest, taxes, depreciation, amortization, and other adjustments.
Capital Raise and Note Offering
To shore up its finances, Hertz announced that its subsidiary, Hertz Corp., plans to issue $300 million in exchangeable senior first-lien secured PIK (payment-in-kind) notes due 2030. PIK notes allow the issuer to pay interest by increasing the principal amount owed, rather than making cash payments. Proceeds from the offering may be used for general corporate purposes, including potential debt repayment.
Additionally, Hertz is launching a $100 million common stock offering through a share-lending arrangement with J.P. Morgan Securities. Under this deal, Hertz will lend shares to J.P. Morgan, which will then sell them to investors. Hertz will receive only a nominal lending fee, while J.P. Morgan or its affiliates will retain the proceeds. The borrowed shares may be sold short by note investors to hedge their positions.
Market Context and Industry Impact
The broader used-car market remains volatile. According to Cox Automotive, the Manheim Used Vehicle Value Index for mid-June showed a 0.6% seasonally adjusted increase from May, but unadjusted wholesale prices fell 0.8%. “Manheim values continue their normal pattern of declining at this time of year,” noted Jeremy Robb, chief economist at Cox Automotive.
Hertz’s warning also weighed on rival Avis Budget Group (NASDAQ: CAR), whose shares dropped 4.1% to $182.59. The rental-car sector has been grappling with fluctuating vehicle values and changing consumer demand patterns.
Hertz reported first-quarter revenue of $2.0 billion in May, an 11% year-over-year gain, while its net loss narrowed to $333 million from $443 million a year earlier. CEO Gil West at the time highlighted “meaningful progress across revenue, asset efficiency, and unit economics.” However, the second-quarter outlook suggests headwinds persist.
Outlook and Risks
With the quarter not yet closed, Hertz cautioned that continued softness in used-car values could further pressure depreciation and cash flow through the summer. Conversely, a rebound in vehicle prices could mitigate the impact on core profitability. Investors will be closely watching for any updates as the company finalizes its second-quarter results.
