Another Year For Olson? Not Exactly. (Fool Plate Special) October 12, 1999

An Investment Opinion

Another Year For Hertz's Olson? Not Exactly.

By Dave Marino-Nachison (TMF Braden)
October 12, 1999

Automobile and equipment rental giant Hertz Corp. (NYSE: HRZ) will say good-bye to nearly a quarter-century of leadership when the millennium-ending ball drops on Dick Clark's head. Frank Olson, who became CEO in 1977, will retire Dec. 31.

Olson will continue as chairman, a position he's held since 1980.

Hertz stockholders shouldn't fear an upheaval in the corporate halls. President and COO Craig Koch, who has been with the company since 1971 -- and in his current positions since 1993 -- will step right in for Olson.

Koch took the opportunity presented by today's announcement to attempt to generate a little buzz. "I am confident the Hertz brand has significant growth opportunities in the future," the CEO-to-be said. "I look forward to the challenge of globally developing those opportunities."

He is taking over a company that apparently is in good shape.

In the immediate term, Hertz today reported Q3 EPS of $1.28, up from $1.09 last year and $0.03 better than First Call's nine-analyst consensus estimate. Revenues rose about 9.8% year-over-year, and operating margins improved to 10.3% from 9.7% as selling, general, and administrative expenses fell slightly.

That trend seems likely to continue with nine-month results showing similar improvement.

With operating income and net income growth more than tripling revenue growth over the last five years (on a compounded basis), Hertz has improved steadily on all its key income statement items; return on equity has also risen over that period, approaching 20% in 1998 after moving up gradually from 12.3% in 1994. Wall Street expects more of the same in coming years.

Those numbers are key for managing profits in a business where a price hike of just a few dollars per day makes headlines, and cash requirements for fleet and upkeep are enormous. For a look at a company that has had trouble keeping up, click on this March Foolish Trouble discussing Budget Group (NYSE: BD).

Hertz, however, seems to be chugging along. With a leading position domestically and opportunities emerging overseas, Hertz should continue providing returns for shareholders -- as it has over its life as a publicly traded company, nearly keeping pace with the S&P 500 -- despite the change in the big office.

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