Avis Budget (CAR, Financial) posted strong results in the recently reported third quarter. The main reason behind its robust performance was the strong demand in North America, along with positive pricing trends. Management is pleased with the results, and it is now expecting better results in the future on the back of good strategies and growing market traction.
Growth across the board
Besides North America, Avis Budget is seeing positive growth signs on the international front. The company’s business across Europe is gaining momentum, and Avis is expecting this to be a good sales driver for it in the future. Avis has been impressive with its strategies. The company has made several acquisitions, including Avis Europe, Payless and Zipcar that are meaningfully contributing to its top line, and it thinks that these initiatives will further help Avis in the days to come.
Avis is now focusing on various initiatives to improve its profitability. It has made several share repurchases in the previous quarters. Moreover, it has also increased its share repurchase authorization by an additional $200 million. This is expected to strengthen Avis’ long-term prospects.
Avis is pleased with the positive pricing trends that it is seeing. Continuing from 2012, Avis is expecting positive pricing trends to continue in the future as well. The main contributors to the enhanced price trends are its strong sales channels and customer segments. Seeing growth across these channels, Avis is expecting them to improve prices further across the entire book of Avis’ business. Further, these positive trends are expected to contribute to Avis’ bottom line. It is expected improved pricing to be a key driver of the company’s earnings, helping it gain market share in the coming quarters.
Strategies in focus
Avis is making efforts to improve returns from its large commercial segment. The company, however, is aware of the fact that the price trends that it is receiving these days are not competitive, and doesn’t reflect the value it offers to the customers. To enhance it, Avis is now focusing on some of the key areas which are most profitable for it. It is also finding ways to improve fleet costs. Avis is aiming at bringing these price trends to North America.
Another favourable trend that Avis is seeing is demand. The company is seeing a robust demand environment both on and off the airport. Further, to improve it, Avis is expanding the size of the non-core and signature fleets.
On the international front, the company however, saw soft performance in Europe due to the challenging macroeconomic conditions. However, the results from this region came in line with its estimates. Avis is seeing good growth from the acquisitions it has made in the past. The acquisitions have enhanced its operational excellence and also reduced the time the customers used to wait for its services. This has happened due to the effective use of low cost technology. Avis is expecting this technology to improve the operations in Europe. To further support this, Avis is also making significant investments in the digital platform.
Conclusion
Hence, Avis is moving in the right direction. It will also benefit from positive trends in the industry. So, investors should consider investing in this stock for long-term gains.
