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Bear of the Day: Avis Budget Group (CAR)


One of the great things about the American economy is its ability to change and adapt to new challenges and opportunities. Sometimes businesses get left behind. Sometimes it's because of a myopic game plan from the top. Other times it's a massive shift in supply that's the driving force behind it. With the availability of ride sharing programs like Uber and Lyft around the country and the world, it's getting tougher for traditional businesses inside the world of transportation to thrive. Add to that, start ups that let you rent cars from strangers like a AirBnB on wheels, and you can see that the demand for traditional car rentals may be slowing a bit.

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That's not to say that these companies are going by the wayside. But the pressure on the demand side of the equation certainly isn't helping the Zacks Rank for these companies. One of the companies struggling here with a Zacks Rank #5 (Strong Sell) is Avis Budget Group (CAR). Avis Budget Group, together with its subsidiaries, provides car and truck rentals to consumers worldwide. It operates the Avis car rental system with approximately 5,550 locations and Budget which has over 3,900 locations.

Avis has been trying to adapt to the changing business environment through its Zipcar car-sharing platform. Zipcar is a membership-based car sharing network that provides vehicles to approximately 1 million members. Think of it as having a car on demand. For a monthly fee, customers are able to access vehicles to run errands. Zipcar has multiple drop-off locations throughout many large urban areas. It's one way that Avis is trying to adapt with the changing times.

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A big reason for the Zacks Rank is the recent downside earnings estimate revisions. Four analysts have dropped their estimates for the current year while three have done so for next year. The bearish sentiment has pushed down our Zacks Consensus Estimate from $3.59 to $3.06 for the current year while dropping next year's numbers from $3.87 to $3.43. Even more chilling is the most recent earnings estimate revision is calling for a 12 cent loss this quarter while the consensus sits at a 5 cent loss. That's a major factor in determining the Zacks Rank.

The business services industry does rank in the Top 43% of our Zacks Industry Rank. Other stocks in the same industry that are Zacks Rank #1 (Strong Buy) stocks include Acadia Research (ACTG) and Vectrus (VEC).

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