Why Avis Is Not the Next Hertz
One question facing many investors during the COVID-19 pandemic: Will Avis (NASDAQ: CAR) follow rival Hertz (NYSE: HTZ) into bankruptcy? After all, it's easy to imagine that Avis's business would also be struggling mightily with transportation and travel statistics plunging. The truth is a bit of a mixed bag, and Avis's second quarter does show how abysmal business has been, but it also shows why Avis isn't likely to follow its rival into bankruptcy protection anytime soon. Let's dig in.
First, let's take a look at the harsh truth. Avis, which generates the majority of its business from travel to and from airports, was hit hard during the second quarter with total revenues declining 67% compared to the prior year. However, even the dismal revenue figures showed sequential improvement with revenues down 78% in April, compared to the prior year, but only down 59% in June. Avis felt the pain on the bottom line, too, reporting a net loss of $481 million and an adjusted net loss of $388 million. Simply put: The second quarter was about as painful as everyone anticipated.
Setting the rough top- and bottom-line figures aside, second-quarter data also gave investors a silver lining and reason to believe Avis isn't following Hertz into bankruptcy. Management did an impressive job of quickly reacting to the impacts from COVID-19 by reducing its costs, reducing its workforce and vehicle fleet, and increasing liquidity. Second-quarter expenses declined 47% compared to the prior year as management quickly removed over $1 billion in costs and is now targeting to remove over $2.5 billion on an annualized basis. That new $2.5 billion target is far more cost-cutting than management initially thought possible with the original $400 million announced in late March.
Source Fool.com
