What: Shares of car and equipment rental company Hertz Global (NYSE:HTZ) surged on Tuesday after the company reported its fourth-quarter results. While the numbers were mixed, with Hertz missing revenue estimates while beating earnings forecasts, a beaten-down stock price and decent guidance were enough to propel shares higher. At 11:30 a.m. ET Tuesday, the stock was up about 12%.
So what: Hertz reported quarterly revenue of $2.41 billion, down 5.7% year over year and $110 million shy of the average analyst estimate. U.S. car rental revenue slumped 4.7%, international car rental revenue fell 9.5%, and equipment rental revenue fell 7.2%. Hertz plans to spin off its equipment rental business sometime this year.
Despite missing on revenue, Hertz reported non-GAAP EPS of $0.05, up from a loss of $0.22 during the prior-year period, and a penny higher than analysts were expecting. As part of its turnaround effort, it is working to reduce costs, with a goal of $350 million in cost savings in 2016, adding to $230 million in cuts the company achieved in 2015.
Now what: For 2016, Hertz expects to grow U.S. rental car revenue by 1.5% to 2.5%, with total adjusted EBITDA in a range of $1.6 billion to $1.7 billion, compared to $1.49 billion in 2015. Consolidated free cash flow is expected between $400 million and $500 million, compared to $755 million in 2015, and $321 million in 2014.
While Hertz's results were mixed, the stock has been wrecked over the past year, falling by nearly 60%. A depressed stock price and low expectations seem to be fueling Hertz's post-earnings rise. With its accounting issues in the rearview mirror, Hertz can now focus on spinning off its equipment rental business and making its car rental business more efficient, and signs of progress on those fronts were evident in the fourth-quarter report. Investors will be looking for further progress in the coming quarters.