|August 31, 2000|
Hertz Lowers Earnings Growth Estimates for 2000 and 2001
|The Hertz Corporation has lowered its outlook for net income growth for the Third and Fourth Quarters of 2000 and for the full year 2001; however, the Company expects to achieve record net income for both 2000 and 2001. In 1999, the Company reported its sixth consecutive year of record earnings, $336 million or $3.10 per share.|
In its revised outlook, the Company estimates net income per share to be $1.30 in the Third Quarter and $0.51 in the Fourth Quarter of 2000, respectively $0.13 and $0.12 per share below analysts' estimates for these periods, and expects net income per share for the full year 2000 to be $3.30. The Company also expects the First Quarter of 2001 will be weaker than the comparable period in the prior year, but believes it will experience low, single-digit net income growth for the full year 2001.
Craig R. Koch, President and Chief Executive Officer, said, "we are disappointed that we will not meet our income targets for 2000 and 2001, but we are on track to achieve record earnings for the seventh and eighth consecutive years. Achieving stronger earnings growth will depend, primarily, on modest price increases in the car and equipment rental segments. Over the long term, we believe there is strong growth potential in our businesses and opportunities to further reduce our cost base."
The Company noted that competitive conditions did not support its Third Quarter initiative to raise U.S. discretionary prices in car rental and that pricing in the commercial market, particularly for large accounts, remains very competitive. The lack of price increases in the car rental segment has been accompanied by lower than anticipated car rental volume growth. The Company believes that the United Airlines labor dispute and severe weather-related airport disruptions affected volume growth. In the North American equipment rental market, downward pricing pressure continues, resulting from a general excess of fleet across the industry.
Hertz also attributed its revised outlook for net income to other, secondary, factors that affect both its worldwide vehicle rental and leasing and worldwide industrial and construction equipment rental segments. These factors include wage inflation, higher interest on debt used to finance vehicles and equipment, unfavorable foreign exchange rates and higher costs related to vehicle acquisitions. Also contributing to the revised outlook are inflation in facilities and advertising costs, along with the costs of additional investments in systems and the consolidation of European financial processing in Dublin, Ireland. The Company believes its results will not be materially affected by the recently announced Firestone tire recall.
Projected revenue growth in the U.S. car rental business remains solid at about 8% for the Third Quarter and 7% for the Fourth Quarter of 2000, compared with the same periods in 1999. For the company's international car rental operations, revenue growth before the effect of foreign exchange is expected to be about 8% each quarter year-over-year.