Shares of Hertz Global Holdings (HTZ) - Get Report rose 7.9% to $21.58 in Tuesday morning trading despite the fact that the struggling rental car company reported fourth-quarter results after the market closed Monday slightly worse than what Wall Street had expected.
Hertz lost 71 cents per share on about $2.01 billion in revenue, which just missed the expectations of analysts surveyed by FactSet. They were looking to see Hertz lose 56 cents per share on about $2.02 billion. As expected, the company declined to provide guidance for the upcoming fiscal year and quarter, with new CEO Kathryn Marinello just two months into her tenure.
Marinello inherits an aging fleet of rental cars that has hurt Hertz's bottom line. Hertz reported that net monthly depreciation per rental car in the U.S. increased 19% year-over-year in Q4, from $269 to $321. It also took a $254 million impairment charge for the quarter.
"The company's 2016 performance resulted from issues around fleet and service, which we are addressing," Marinello said in a statement.
Hertz's public struggles to rein in its fleet costs pressured its shares recently. In November, the company blamed an adjustment in its fleet depreciation rate for a drastic cut to its full-year earnings outlook. The news sent the stock plunging by as much as 50% and prompted billionaire corporate raider Carl Icahn to more than double his investment in the company.
Icahn has about a 35% stake in Hertz and controls three seats on the company's seven-member board.
"It remains to be seen if the new management team will be able to make significant changes," Morgan Stanley analyst Adam Jonas wrote in a research note. "But there is the possibility that Hertz will be able to deliver greater than expected cost savings and improved fleet management."
Any changes that Marinello and her allies make are not likely to manifest themselves immediately, hence the decision to withhold guidance. At least one change is already underfoot: Hertz is in the process of swapping out its older information technology systems.
"In our view, 2017 will be another transition year," MKM Partners analyst Christopher Agnew wrote in a research note.