In addition to the airline and tourism industry, car-rental companies have been among the many businesses that have seen drastic declines in revenue over the past couple of months. That’s exactly what happened with Avis Budget Group (NYSE: CAR) on Monday, with the car rental company announcing it expects revenue for the months of April and May to be down a staggering 80% of the firm rolls back on its rental orders.
The company stock ended up falling a little in response to Avis’s first quarter 2020 financial results. In an official statement, the company went on to say that it predicts this ongoing pandemic to continue to cripple demand for rental cars, both for regular use as well as business clients. The company went on to say that it lost $158 million over the course of the quarter, which is significantly worse than the $91 million reported around the same time last year, although slightly better than what some of the more bearish Wall Street analysts were predicting.
“Our top priority continues to be the safety of both our employees and our customers. Our front line employees went above and beyond to assist people in getting home, traveling to care for loved ones or to provide essential services, including first responders and delivery services,” said Jeo Ferraro, Avis’s CEO in an official statement from the company. “At the same time, we took early and decisive actions with our fleet, disposing of 35,000 cars in the month of March and cancelling 80% of our incoming rental vehicle orders in the United States for the remainder of the year.”
Although the company expects to see a gradual recovery in June and July, it’s also quite likely that the effects of the pandemic could linger on well across the entire year. Avis’s management has said that it also expects that travel restrictions will ease up this summer, which would correspond closely to how many countries are planning to end their quarantines in the coming months and try to set things back to normal once again.
Shares of Avis ended up falling 4% in after-hours trading following the news. In the grand scheme of things, however, Avis hasn’t fared all that poorly in comparison to some of its competitors. A recently published reported from the Wall Street Journal suggested another rental car giant, Hertz, hired an advisor to help with the company’s supposed bankruptcy filing. While Avis doesn’t seem like it’s going to go bankrupt yet, the company will need to tough out a few more challenging months before things get better this year, if they do at all.
Avis Company Profile
Avis Budget Group Inc is a provider of automotive vehicle rental and car-sharing services. Its brands include Avis, Budget, and Zipcar. Avis is targeted to serve the premium commercial and leisure segments of the travel industry, while Budget is focused on value-conscious customers. The company operates its own network of rental locations and licenses its brands to franchisees. Zipcar is a car-sharing service that allows members to use the company-owned Zipcar fleet at an hourly rate. The company’s largest region by revenue is the Americas. – Warrior Trading News
