Avis Budget (CAR, Financial) witnessed advantages from Phase 1 of its combined demand fleet pricing system and gained added benefits from its Zipcar, Payless and Avis Europe acquisitions.
Creating value
Avis strategically allocated its capital and bought back 60 million of its shares during the third quarter and repurchased 70 million more shares during October, making its net share purchases $280 million. Avis has developed an investor-friendly management and expanded its share repurchase authorization by an extra $200 million to illustrate its solid business health for long-term growth and gain the required capacity.
The key acquisitions and strategic share repurchases depicts the company’s robust cash position to invest into the long-term growth.
Making the right moves
During the quarter, Avis launched the initial phase of its demand fleet pricing tool, its yield manager to several other locations that include eight of its major local markets, where a significant growth is seen. Avis is focused on optimizing its competitive pricing and its pricing tool speeds up and rationalizes the decision-making process much better than the manual action capabilities. Hence, its pricing has now become highly agile and active.
In summer, Avis witnessed solid demand scenario for the airport and external to it. It enhanced the rental volume by 6% in North America and increased commercial rental volume by 5% with leisure rising 6%.
Avis is focused on rationalizing its pricing system and experienced solid volume gains in North America which highlights the effectiveness of its key growth strategies.
Avis has experienced a significant expansion in the synergies from its European operations post an added $5 million investment in brand marketing coupled with ongoing investment in innovative digital platforms during the quarter.
Avis is very intelligently dealing with the rising fleet cost pressures and is believed to have the lowest risk cars compared to any of its competitors.
The unique growth techniques employed by Avis to fight the increasing cost pressures and plan for other key investments in the quarter are estimated to position Avis ahead of its competition.
Avis introduced a unique program that primarily targets some major frequent travelers globally, including the 45,000 members of Southwest Airlines flight crews. It is installing Zipcars at airports and at key hotels where crews normally stay and has started signing up several other new Zipcar members during this year mainly due to the attachment developed. Hence, Zipcar has currently developed an inclusive and growing customer base of over 900,000 members.
In September, Avis executed irreversible deals accessible to more than 80,000 Zipsters in Boston. Avis also entered into a contract with the GSA to service government employees in Chicago, Boston, New York and Washington. It signed extra corporate accounts to Zipcar for enabling its mobility requirements by leveraging its present Avis Budget dealings. It offered Zipcar domestically to 21 extra universities in four innovative markets such as Zipcar in Dallas. And lastly, it executed the ongoing worldwide development of the Zipcar brand launch in Paris during the third quarter in Madrid for this month.
The new and unique strategic agreements signed by Avis for the quarter are believed to expand the company’s global reach and bring in significant revenue streams for Avis, going forward.
Avis targets acquiring its major licensee in North America having rights for the sub-licensing of the Budget brand and operations in Las Vegas and Southern California. This is forecast to be a strategic target for Avis because L.A. controls the key airports in Southern California and North America and being a key gateway market for a valuable brand such as Budget coupled for inbound travelers.
Avis estimates the pricing in North America to expand by 2% to 3% along with an increase in demand.
Conclusion
Overall, investors are advised to invest in Avis Budget Group, Inc., looking at an impressive company valuation with a P/E ratio of 34.42 and closer to the industry’s average of 16.50 indicating that it is priced for a growth shareholder. The investors looking for a developing stock must consider Avis with EPS of 1.82 and better than the industry’s average of 0.41 only.
The stock is slightly lower priced compared to its growth forecast with a PEG ratio of 0.72 and is believed to have further room for expansion beyond its growth estimates. Therefore, analysts reiterate a strong buy rating for the stock due to the satisfactory profit margin of 2.30% partially offset by huge debt levels on the balance sheet with total debt of $12.84 billion compared to total cash of $713.00 million only.
