On Tuesday 8th November 2016, Hertz Global Holding Inc. (HTZ) saw its stock plummet after it missed its earnings target by a very wide margin. Adjusted earnings per share for the giant car rental and sales company were reported at $1.50, versus analyst EPS estimates of $2.73. The stock closed on November 7th at $35.74 but quickly dropped to a close of $27.70 on November 8thafter earnings were announced, a decrease of over 20% in the stock price in a one-day span.
In its Q3 earnings, Hertz reported significantly lower profits than was expected by analysts. Throughout 2016, Florida-based Hertz has been aggressively cutting costs in its business, targeting $350m in total cost cuts through the year but, while the company has been able to cut a lot of costs, the falling value of some of its rental vehicles drove the weak profits seen by the firm. Chief Executive John Teague largely blames the poor financial results on depreciation oftheir smaller and midsize vehicles for the devastating earnings results. Hertz, who rents and leases cars and trucks in both the United States and Internationally, owns both the Dollar and Thrifty rental brands and saw much lower rental volumes in the third quarter. As a result of all these factors, the company slashed earnings projections for the remainder of 2016.
Yet in this tumultuous time for Hertz, Carl Icahn sees opportunity. Icahn already owned a fairly large stake in the company but quickly doubled his holding in Hertz, buying 15.1M shares to vastly increase his holdings in Hertz – the investor revealed a 33.8% stake in his recent filing HTZ makes up 2.62% of Icahn’s holdings and his total shares owned of Hertz now equates to a $520M stake for the billionaire.
While Icahn isn’t the only billionaire in our list who owns Hertz, he certainly owns the largest stake. Only 2 other billionaires invest in the company: Larry Robbins, who holds a $265M stake to make up 1.9% of his portfolio and; George Soros, who only has a stake of $610K which makes up a very small proportion of his portfolio at 0.02%. Other billionaires have chosen to opt out of Hertz such as David Einhorn, Daniel Loeb and Chase Coleman1.
In addition to the rocky financial results at the car rental company last year, the new year will see big changes for Hertz: Teague stepped down as CEO of the company on January 3rd and Kathryn Marinello stepped up to take his place, as announced in December.3 The new Chief Executive, Ms. Marinello, was a former General Electric executive and Carl Icahn is excited to see the new female CEO taking charge. As quoted in the WSJ, Ichan said “I am excited about Hertz and its prospects with Kathy at the helm,” and “she is the right person to lead Hertz as we move forward.”
With a new CEO in charge, Carl Icahn, as well as many other investors, are watching Hertz very closely.