TLDR
- Hertz stock fell more than 20% in pre-market trading Wednesday after cutting its Q2 earnings outlook.
- The company now expects Q2 Adjusted Corporate EBITDA of $50M–$80M, at the low end of prior guidance.
- Losses on used-car sales in May reversed gains made in April, pushing net depreciation to ~$300 per unit per month.
- Hertz plans a $100M stock offering and a $300M exchangeable senior note offering to raise capital.
- Fleet size, revenue per day, and rental days are expected to meet or slightly exceed prior expectations.
Hertz Global Holdings stock took a hard hit Wednesday morning, falling more than 20% in pre-market trading to around $3.98. The drop came after the car-rental company revealed its Q2 earnings are shaping up worse than expected, while also announcing plans to raise capital.
Hertz Global Holdings, Inc., HTZ
The company said it now expects Q2 Adjusted Corporate EBITDA of between $50 million and $80 million. That’s still within its guided range — but right at the low end of it.
The trouble came from the used-car market. Hertz had expected to post gains on vehicle sales throughout the second quarter. Instead, May turned into a loss month, wiping out the gains it had made in April.
That shift pushed net depreciation per unit per month up to approximately $300 for Q2. In early May, executives had flagged they expected that figure to come in well below $300. It didn’t.
The soft used-car market is the main culprit. Demand for pre-owned vehicles has weakened, making it harder for fleet-heavy companies like Hertz to offload cars without taking a hit.
There is a silver lining in the operating numbers. Fleet size, revenue per day, and rental days are all expected to meet or slightly exceed earlier projections. Demand for rentals has stayed healthy, and capacity utilization came in better than expected.
Year-over-year revenue per day growth in Q2 has also picked up pace compared to Q1. So the core rental business isn’t the problem here — it’s the back-end of the business, where cars get sold off.
Capital Raise Adds to the Pressure
Alongside the earnings warning, Hertz announced two capital-raising moves that spooked investors further.
The first is a $100 million common stock offering through a share-lending arrangement with J.P. Morgan Securities. Under the structure, Hertz loans the stock to J.P. Morgan, which then sells it to investors. Hertz won’t receive any of the proceeds — J.P. Morgan keeps them — while Hertz collects only a nominal lending fee.
The second is a $300 million offering of Exchangeable Senior First-Lien Secured PIK Notes due 2030, targeted at institutional buyers. The notes can be exchanged for cash, Hertz stock, or a combination, at The Hertz Corporation’s discretion.
Proceeds from the notes are earmarked for general corporate purposes, which may include paying down existing debt. The stock offering is contingent on the notes deal closing, though not the other way around.
What Hertz Said
The company filed its preliminary update with the SEC on Wednesday morning, giving investors their first look at where Q2 stands.
Hertz operates more than 11,000 rental locations across 160 countries and is headquartered in Estero, Florida.
As of Wednesday’s pre-market session, HTZ was trading around $3.98, down from its previous close of $5.06.
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