Hertz Global Holdings (NASDAQ:HTZ) saw its shares extend their post-earnings rally on Friday, with premarket trading indicating a 21.8% jump to $2.46. The surge follows the car rental company's second-quarter results, which showed revenue growth driven by stronger pricing rather than increased rental volume, and a narrower-than-expected adjusted loss.
The company reported revenue of $2.396 billion for the quarter, a 10% increase from $2.185 billion in the same period last year. Adjusted diluted loss per share came in at 11 cents, significantly better than the consensus estimate of a 24-cent loss and an improvement from the 29-cent loss recorded a year earlier. Adjusted corporate EBITDA surged to $81 million from $18 million, with the margin expanding to 3.4% from 0.8%.
Investors responded enthusiastically, with Thursday's trading volume of 155.8 million shares representing eight times the 65-day average. Short interest stood at 28.66% of the float as of July 15, suggesting that short covering may have amplified the move. From Wednesday's close of $1.56, the stock has now climbed 57.7%.
The revenue growth was primarily driven by a 9% increase in revenue per day (RPD) at constant currency, which reached $61.98. Transaction days were essentially flat at 38.646 million, while the average fleet size declined 1% to 539,118 vehicles. An initial reporter analysis attributes approximately 93% of the reported revenue growth to pricing impact, with the RPD increase contributing $196.7 million to the $211 million total revenue gain.
Pricing gains outpaced cost inflation. Adjusted direct operating expenses rose by $51 million, and vehicle depreciation and lease charges increased by $72 million, but the pricing impact was 1.6 times greater than the combined increase. The spread between RPD and operating costs widened by 17% to $24.36. CEO Gil West commented, "This quarter's results reflect the disciplined execution of our strategy and our consistent commercial strength."
However, the quality of earnings remains a concern. While GAAP net income turned positive at $64 million, management noted that the profit was supported by sale-leaseback gains and revaluations of notes and warrants. On an adjusted basis, the company still posted a net loss of $47 million. Additionally, recalls reduced adjusted EBITDA by approximately $30 million, impacting an average of about 15,000 vehicles, a nearly 300% increase from a year earlier.
Compared to rival Avis Budget Group (NASDAQ:CAR), Hertz showed stronger revenue and RPD growth. Avis reported a 1.3% revenue decline but maintained higher margins by reducing its fleet more aggressively. Hertz's monthly depreciation per unit rose 18% to $302, while Avis's fleet cost fell 4% to $290, indicating that Hertz faces higher cost pressure.
Cash conversion weakened, with adjusted free cash flow dropping to $162 million from $327 million. Net spending on revenue-earning vehicles increased to $1.059 billion from $923 million, and corporate liquidity fell to $984 million from $1.489 billion at year-end. Looking ahead, management projects adjusted corporate EBITDA of $275 million to $325 million for the third quarter, with positive earnings per share expected. Transaction days are forecast to rise about 1%, suggesting that unit economics will continue to drive performance.
