Shares of Avis Budget Group Inc. (NASDAQ:CAR), a provider of automotive rental and car-sharing services, lost 11.6% on Thursday after the company reported strong first-quarter results. Avis' move lower even sparked a 9.1% sell-off in rival Hertz Global Holdings, Inc. ahead of its May 7, 2018, reporting date.
Yes, you read that last sentence correctly: Shares fell despite a strong report. Revenue grew 7% to a record $2 billion during the first quarter while its net loss improved by $20 million and adjusted EBITDA improved by $29 million. Analysts had projected Avis' adjusted earnings to check in at a loss of $1.04 per share, but the company topped that, posting an adjusted loss of $0.74 per share.
"The first quarter has our year starting on a very positive note with strong demand, higher underlying pricing in the Americas, improved utilization and lower per-unit fleet costs," said Larry De Shon, Avis Budget Group president and CEO, in a press release. "With both pricing and fleet costs in the Americas having stabilized, the benefits of our strategic initiatives were clearly evident this quarter with year-over-year profitability improving significantly."
The only negative, if you can even describe it as such, was that management guided for full-year adjusted EPS between $2.90 and $3.75 per share, which puts the midpoint of $3.325 below consensus estimates of $3.37, according to Bloomberg. It's possible some institutional investors decided to cash out after a 55% stock price increase over the past 12 months through Wednesday, despite the price-to-earnings ratio remaining cheap at roughly 10. Whatever the reason for today's decline -- and it's not unusual for the stock to pop and drop on quarterly reports -- and investors should walk away happy about the financial performance during the first quarter.