JPMorgan maintains Hertz stock Underweight after EBITDA miss

On Wednesday, JPMorgan reiterated its Underweight rating on Hertz Global (NASDAQ:HTZ) following a significant drop in share price. Hertz stock plunged on Tuesday, contrasting with a modest gain in the S&P 500. The decline came after the company reported a larger-than-expected EBITDA loss for the first quarter of 2025. The results revealed a loss of $325 million, which was more severe than JPMorgan’s estimated loss of $273 million and the Bloomberg consensus of a $276 million loss.

The shortfall was attributed to weaker sales trends and higher than expected vehicle interest and SG&A expenses. These factors were only partially mitigated by favorable vehicle depreciation and improvements in Direct Operating Expense (DOE). Hertz has been actively updating its rental fleet, phasing out older, costlier vehicles in favor of newer, more economical models.

Despite the challenges, Hertz has been focusing on maintaining profitable pricing strategies over chasing volume. This approach has led to a deliberate in-fleeting of 2025 model year vehicles ahead of schedule to circumvent potential tariff-related price hikes. To date, Hertz has acquired two-thirds of its 2025 model year vehicles. The company’s strategic initiatives come amid challenging profitability metrics, with a negative return on assets of -13.46% and concerning cash flow yields, as highlighted in the comprehensive Pro Research Report available on InvestingPro.

Rental car pricing trends started strong in January and February but weakened in March and early April. The softening was partly due to macroeconomic uncertainty, the timing of Easter, and the non-recurrence of the previous year’s solar eclipse event. Management noted that the Revenue per Unit (RPU) per month would have likely been consistent year-over-year, instead of the reported 2.7% decline, after adjusting for the leap year and fleet composition changes aimed at aligning with customer preferences and enhancing margins.

The first quarter of 2025 also highlighted Hertz’s commitment to cost efficiency, as evidenced by various partnerships with technology firms. These collaborations are aimed at improving customer experience and cost productivity through initiatives such as a modified revenue management system and AI-driven vehicle inspection and pricing optimization.

In other recent news, Hertz Global Holdings (OTC:HTZGQ) reported first-quarter 2025 earnings that fell short of expectations. The company posted an earnings per share (EPS) of -$1.12, missing the forecasted -$0.94, and revenue of $1.81 billion, below the anticipated $2.01 billion. This shortfall raises concerns about Hertz’s ability to meet its financial targets amidst ongoing macroeconomic uncertainties and a strategic reduction in fleet size. Additionally, Goldman Sachs maintained its Sell rating on Hertz, setting a price target of $3.00 due to revenue shortfalls linked to fleet size reductions and concerns over market share recovery. Despite Hertz’s confidence in achieving its long-term guidance, Goldman Sachs adjusted its estimates downward, projecting a 2025 adjusted EBITDA of -$138 million. The company highlighted its strategic partnerships and initiatives to improve operational efficiency and cost management as positive developments. However, the challenges posed by a reduced fleet and macroeconomic factors continue to impact Hertz’s financial performance.

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