Why Hertz (HTZ) is Jumping Today

NEW YORK (TheStreet) -- Hertz (HTZ) gained as much as 1.7% to $29.63 Friday after news that billionaire investor Carl Icahn has taken a stake in the rental car company.

According to CNBC, Icahn now owns between 30 million and 40 million shares of Hertz. News of the investment comes days after Hertz announced a shareholders rights plan, a so-called "poison pill," that prevents any shareholder from owning 10% of the company without first meeting with the board of directors.

Ichan's stake in the company reportedly takes the form of both common shares and derivatives.

TheStreet Ratings team rates HERTZ GLOBAL HOLDINGS INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate HERTZ GLOBAL HOLDINGS INC (HTZ) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations, solid stock price performance and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 2.9%. Since the same quarter one year prior, revenues rose by 22.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has increased to $1,393.00 million or 43.38% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 4.69%.
  • Compared to its closing price of one year ago, HTZ's share price has jumped by 60.09%, exceeding the performance of the broader market during that same time frame. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • HERTZ GLOBAL HOLDINGS INC's earnings per share declined by 14.5% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, HERTZ GLOBAL HOLDINGS INC increased its bottom line by earning $0.54 versus $0.38 in the prior year. This year, the market expects an improvement in earnings ($1.70 versus $0.54).
  • The gross profit margin for HERTZ GLOBAL HOLDINGS INC is rather high; currently it is at 53.17%. Regardless of HTZ's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, HTZ's net profit margin of 6.99% is significantly lower than the industry average.

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