Zipcar Steps on the Gas

Zipcar (Nasdaq: ZIP  ) is tired of seeing its stock being driven in reverse.

The country's leading auto-sharing service posted blowout quarterly results after Thursday's market close. A blowout isn't welcome when you're driving a Zipcar, but it comes as a welcome sight for investors.

Revenue climbed 15%, to $78.2 million, fueled by an 18% increase in membership. There are now 767,000 Zipsters out there with the ability to seamlessly rent cars by the hour -- with gas and insurance included.

Would it be better to see revenue growing faster than its fleet of drivers? Sure. That would mean that the average user is getting more value out of the annual membership. However, a 15% boost is better than the mere 11% top-line advance that analysts were forecasting.

The news gets even better on the bottom line, where profitability popped fivefold to $0.10 a share. Wall Street was actually looking for net income to decline to $0.01 a share during the period.

Zipcar now has a presence in more than 300 different college campuses. It recently entered my hometown of Miami -- scattering a few hybrids, convertibles, and luxury rentals across Downtown Miami and Miami Beach -- for its twentieth metropolitan market.

The margin-widening performance is encouraging, and its ability to keep its original markets booming is a testament to the long-term viability of the Zipcar model. Its four established markets -- Boston, New York, Washington, D.C., and San Francisco -- matched the company's year-over-year revenue growth of 15%. More importantly, pre-tax operating profit margins widened from 23%, to 29%.

The current quarter is a seasonally soft period, and Hurricane Sandy's disruption in the company's northeastern stronghold isn't helping. Analysts were targeting a profit of $0.09 a share on $69.3 million in revenue. The top-line forecast is in line with the $67 million to $71 million that Zipcar is expecting, but Zipcar's guidance calls for earnings to come in between breakeven and $0.08 a share.

The good news here is that the strong third quarter still finds Zipcar raising its revenue, earnings, and adjusted EBITDA targets for all of 2012.

The bottom line here is that Zipcar keeps rolling, despite competitive pressures. Hertz (NYSE: HTZ  ) continues to invest in Hertz On Demand, even with its focus now on completing its $2.3 billion deal for Dollar Thrifty (NYSE: DTG  ) . Avis Budget (Nasdaq: CAR  ) has been emphasizing auto-sharing at the enterprise level. Even General Motors (NYSE: GM  ) can be considered a threat now that it lets OnStar-equipped car drivers offer up their vehicles through RelayRides.

However, as long as Zipcar keeps growing -- and that's certainly happening both here and abroad -- the stock won't be stuck in the single digits for long.

Shifting into gear

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