Hertz Surges as Profit Turnaround Boosts Carl Icahn's Rental-Car Bet

(Bloomberg) -- Hertz Global Holdings Inc. posted its biggest quarterly profit in three years, sending shares of the Carl Icahn-backed rental-car company surging.

Adjusted net income rose to about $189 million in the third quarter, Hertz’s best showing since 2015. Earnings per share also beat estimates by a wide margin, and the stock jumped as much as 21 percent after the close of regular trading Thursday.

Chief Executive Officer Kathryn Marinello has spent nearly two years unloading passenger cars that have fallen out of favor both in the used market and with rental customers. She’s rapidly replaced sedans with more popular sport utility vehicles to lure customers, command better daily rental rates and improve returns on reselling autos at auction.

“With great volume in the U.S., it looks like turnaround is working and the shorts will get squeezed tomorrow,” Hamzah Mazari, an analyst with Macquarie Capital Inc., said Thursday.

Almost 37 percent of Avis shares are held by investors who are betting the stock will fall, according to data compiled by Bloomberg. Icahn, 82, is Hertz’s largest shareholder, with a 35 percent stake as of the end of June.

Signs of Rebound

Hertz showed signs of rebounding in the second quarter with a smaller-than-expected loss and a forecast that the company may generate positive cash flow next year. But it had been a rough ride for investors since then, with the stock down about 26 percent for the year. Rival Avis Budget Group Inc. also has struggled, nearly matching Hertz’s decline.

Earlier: Avis tumbles as Europe business drags on profit

Hertz’s changeover of its fleet has helped fix one of the company’s biggest problems in recent years: plummeting values of the cars on its lots, especially in the U.S. Depreciation costs in the third quarter fell 15 percent to about $261 a car, per month.

As with its rival Avis, Hertz saw better pricing at home, with revenue per day rising about 3 percent to $46.23 a car.

But also like Avis, the international business suffered. Hertz said income for the segment fell about 10 percent to $133 million.

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