Shares of global car rental group Avis Budget Group Inc. (CAR) fell by approximately 1% in extended trading on Monday. This move came after the New Jersey-based company announced first-quarter earnings and revenue that surpassed analyst expectations. The success was partially attributed to strong demand, along with per day revenue that was in line with the prior year.
Demand was particularly strong for the company’s international, inbound, and commercial customers, which all experienced improved growth. First-quarter earnings for the company included income of $312 million, or $7.72 per share. This compares to earnings of $519 million, or $9.71 per share, posted a year ago. Revenues for the firm rose by 5% to $2.6 billion. According to FactSet data, the revenue growth exceeded the anticipated earnings per share of $3.07 and sales prediction of $2.5 billion.
This year, Avis’ revenues have expanded for several reasons, including strong revenue growth in the Americas segment, thanks to greater utilization of the company’s vehicles, and lower per-unit-fleet costs, which significantly contributed toward achieving profit margins. Likewise, Business Insider reported that the car rental company has been gaining market share. Avis Budget Group ended the first quarter with cash and cash equivalents of approximately $1.15 billion, up from $1.08 billion reported toward the beginning of the year.
Alongside fellow rental firms, Avis is navigating a changing transportation sector. Last year, both Avis and competitor Hertz faced uncertainty due to supply issues impacting the used-car market. While excess cars depreciated at a faster rate than anticipated, the companies were unable to dispose of surplus vehicles efficiently. To offset this, Avis introduced a new strategy, which included embedding connectivity into its cars.
This trend has continued, with the car rental industry benefiting from the widespread interest in connected cars. As the concept of cars as a service becomes increasingly popular, such devices are becoming more commercialized. It’s predicted that autonomous vehicle fleets offering other modes of transportation for members will also continue to become more mainstream. Consequently, the car rental industry, along with travel and fleet management, is expected to be disrupted by such trends.
Given that, companies such as Avis have pivoted their strategic direction, embracing digitally connected cars and associated driving capabilities, as well as other industry disruptors. Last year, the company entered a partnership with Alphabet Inc.’s autonomous car division, Waymo, signing a deal to manage the latter’s fleet of self-driving minivans.
Notably, the car rental industry is moving toward a market composed of more advanced driver assistance systems (ADAS), alongside semi-autonomous and autonomous vehicles. Such trends will require investment by rental firms in technology and associated infrastructure, to meet the needs of customers and more effectively manage their fleets.
Avis Budget Group, Inc., founded in 1946, provides vehicle rental services through a network of approximately 10,000 car and truck rental locations in 180 countries. The firm operates through three segments, which offer vehicle rentals, car sharing, and vehicle disposal services. The company’s popular brands include Avis, Budget, and Zipcar.