Why Avis Budget Group Stock Was Falling Today

Key Points

• Avis reported flat revenue in the second quarter, but solid growth in adjusted EBITDA.

• The company announced a new premium service and a partnership with Waymo.

• Its full-year guidance remains strong at an adjusted EBITDA of $900 million to $1 billion.

• 10 stocks we like better than Avis Budget Group ›

Shares of Avis Budget Group (NASDAQ: CAR) were moving in the wrong direction today after the rental car leader came up short in its second-quarter earnings report.

As of 1:16 p.m. ET, the stock was down 15.4% on the news.

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Avis hits the brakes

Avis stock had soared through the second quarter, seemingly on renewed hopes for economic growth amid a détente in the trade war. Billionaire Bill Ackman's investment in Hertz Global may have also attracted attention to the rental car sector. However, the second-quarter results weren't enough to sustain that momentum.

Revenue in the quarter was flat at $3.04 billion, which was slightly ahead of the consensus at $3 billion. The company did make improvements further down the income statement with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rising 29% from $214 million to $277 million.

Avis also announced a multiyear strategic partnership with Waymo to launch fully autonomous ride-hailing in Dallas, where Avis will be responsible for fleet management, and it launched Avis First, a premium offering that includes frictionless curbside pick-up and drop-off, a dedicated concierge, and current-year vehicles.

On the basis of a generally accepted accounting principles (GAAP) basis, the company reported earnings per share of $0.10, down from $0.41 a year ago and well below estimates at $1.83.

What's next for Avis

For the full year, Avis is targeting adjusted EBITDA of $900 million to $1 billion and per-unit fleet costs of $310 to $320 per month.

The company didn't give third-quarter guidance, but the summer season is crucial for the company, as it makes all its profit during the peak travel season.

Despite today's sell-off, Avis seems to be in a good position with product innovations like Avis First. If the economy remains healthy, the stock could climb further.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.