Hertz Expects Strong Rental-Car Demand This Summer but Little Pricing Relief
Hertz Global Holdings Inc. reported better-than-expected results in the first quarter and said it has more vehicles in its fleet for use ahead of the upcoming travel season.
Rental-car demand surged during the coronavirus pandemic as consumers strayed from using public transportation and airports. Supply constraints pushed prices higher, which is expected to continue into the coming summer months.
Hertz’s average available inventory to rent jumped 26% over the prior-year period, rising to 455,000 vehicles from 368,000, according to quarterly results released Wednesday.
Part of the inventory increase is attributed to deals Hertz reached last year to purchase tens of thousands of electric vehicles, including from Tesla Inc. and Polestar, a Swedish luxury car brand. Stephen Scherr, Hertz’s chief executive, has said that higher gas prices have pushed some customers into electric vehicles and that nearly half of the EVs offered by Hertz have enough battery range to ensure drivers won’t need to recharge during their reservation.
Mr. Scherr, a former Goldman Sachs executive who became CEO in February, said the company is seeing high utilization in particular of Tesla vehicles across all customer segments.
Prices for customers in the coming months, however, will likely remain consistent, Mr. Scherr said, citing the limited supply available to grow the company’s fleet even more.
“I don’t expect prices to come down any time soon by virtue of the demand that’s there and the limited supply,” Mr. Scherr said.
Monthly revenue per vehicle rose 26% compared with a year ago, Hertz reported, citing a recovery in travel demand. Bookings into the coming months are strong, Mr. Scherr said, suggesting the summer season will be active. Hertz typically has a seasonal increase in business between the first and second quarter of the year, but Mr. Scherr said the company expects it to be even higher this year.
Following the company’s bankruptcy filing in May 2020, a group of investment firms took over Hertz last June, and the company’s prospects have generated enthusiasm among individual traders. The Estero, Fla.-based rental-car company went public again in November and is valued at about $9.85 billion.
Hertz reported first-quarter net income of $426 million. Revenue rose 57% to $1.8 billion in the first quarter, and adjusted pre-tax profit for the three-month period was $614 million, exceeding analysts’ estimates.
Hertz’s shares were down 1.4% to $23.19 in after-hours trading.
