Despite a 12% Increase in Revenue Due to Rising Automobile Rental Demand, Hertz Stock Fell

October 27, 2022 at 15:25 PM EDT

Hertz Global Holdings Inc (NASDAQ:HTZ)

Demand for rental vehicles remained robust amidst rising leisure travel and tight output from manufacturers, helping Hertz Global Holdings Inc (NASDAQ:HTZ) announce a 12% quarterly revenue increase on Thursday. Despite that, Hertz stock declined in the market.

Quarterly sales increased to around $2.5 billion from $2.23 billion a year earlier. Still, net income increased by just 1% to $577 million, or $1.33 per share. This was partly due to purposefully increasing maintenance expenses to address out-of-service levels.

Hertz CEO Stephen Scherr remarked in an interview, “We controlled the fleet quite aggressively.”

“Undeniable strength in demand across leisure, corporate, and for us, our ride-share business,” he added, describing how Hertz stock benefited from the same booming travel industry as airlines, hotels, and others.

Despite the high dollar, Scherr said there were “elevated reservations” for forthcoming visits by overseas visitors. Travel bookings (NASDAQ:BKNG) for popular winter destinations like California and Florida are already running at two times higher than expected for the year 2021. In his opinion, “Leisure demand is strong,” Scherr said.

The relaxation of coronavirus limitations has led to a significant increase in the vehicle rental business, which is inextricably linked to airline traffic and hotel reservations.

Scherr said that the average duration of a business automobile rental had climbed slightly over a day as more and more business travelers combined work and pleasure throughout their travels.

Consumers have also turned to automobile rentals in more significant numbers as manufacturers like Ford Motor (NYSE:F) Co and General Motors Co have struggled to meet demand owing to inventory constraints.

After announcing intentions to purchase 100,000 Tesla (NASDAQ:TSLA) EVs in October 2021, Hertz revealed last month that it planned to procure up to 175,000 GM (NYSE:GM) EVs over the following five years.

Among its fleet of roughly 500,000 cars, Hertz now has about 40,000 electric vehicles, and these vehicles have maintenance expenses that are 50% cheaper than the rest of the fleet.

By 2024, Hertz plans to have 25% of its fleet be electric.

Hertz said that third-quarter corporate business was 75% of pre-pandemic levels and that rentals to corporations were a significant factor in the demand for electric vehicles among firms interested in cutting their carbon footprint.

In lunchtime trade, Hertz stock was down nearly 1%.

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The stock of Hertz fell despite a 12% increase in revenue due to rising demand for vehicle rentals.

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