Here's Why You Should Retain Avis Budget Stock in Your Portfolio Now

Avis Budget Group, Inc. CAR is gaining from the recovery of global tourism to its pre-pandemic level. Strategic fleet management enables the company to mitigate the effects of supply-chain disruptions. Meanwhile, rising fleet costs affect the bottom line and low liquidity is a red flag for investors.CAR’s revenues are anticipated to increase 1.5% and 2% year over year in fiscal 2025 and 2026, respectively. Earnings are estimated to surge more than 100% in fiscal 2025 and 63.7% in fiscal 2026.Factors That Auger Well for Avis Budget’s SuccessThe car rental industry, particularly in North America, has been experiencing strong demand, driven by changes in consumer behavior, including an inclination on short-term vehicle access rather than ownership. Per Statista, the car rental market in North America is expected to reach $37 billion in 2025. Avis Budget’s strong market share positions it to capitalize on these trends.According to UN Tourism, the global tourism sector recovered 98% of the pre-covid levels in the first nine months of 2024. As global travel continues to rebound from the pandemic blues, Avis Budget Group will benefit from this rebound and witness an increase in demand for car rentals, both in leisure and business travel, boosting its top line.Avis Budget's strategic fleet management, including vehicle acquisition at favorable prices and swift adjustment of fleet size based on demand, has improved the company’s operations. This flexibility has allowed CAR to mitigate the effects of supply-chain disruptions, particularly those involving vehicle shortages.Strong international inbound and inter-European cross-border leisure travel, generating higher margin business while exiting lower price volume, drove the leisure business. This resulted in an increment in the overall revenues per day. Furthermore, a fully operational demand fleet pricing system in CAR’s European business improved the contribution margin by raising vehicle utilization and enhancing revenues per day.Risks Faced by CARAbout 90% of Avis Budget’s fleet in 2024 is risk vehicles, making the company highly susceptible to fluctuations in the used car market. The company’s presence within the used car market makes it unstable, resulting in difficulty in predicting vehicles’ resale value. CAR’s reliance on risk vehicles and the used car market increases fleet costs, thereby affecting its profitability.In 2023, fleet costs represented nearly 17% of total expenses, which increased to 21% in 2024. In 2024, total expenses increased 42.8%, hinting at a massive surge in fleet costs, which insinuates that the company might face difficulty in navigating within the risk vehicle and used car market.CAR’s current ratio (a measure of liquidity) at the end of fourth-quarter 2024 was 0.75, lower than the industry’s 1.25. The metric declined 6.3% from the year-ago quarter due to a fall in cash reserve. A current ratio of less than 1 often indicates that the company might have problems paying off its short-term obligations. Image Source: Zacks Investment Research Avis Budget’s Zacks Rank & Stocks to ConsiderCAR has a Zacks Rank #3 (Hold) at present.Some better-ranked stocks from the broader Zacks Transportation sector are Deutsche Lufthansa DLAKY and Expeditors International of Washington, Inc. EXPD, each carrying a Zacks Rank of 2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Deutsche Lufthansa has a long-term earnings growth expectation of 11.1%. DLAKY delivered a trailing four-quarter earnings surprise of 32.9%, on average.Expeditors International has a long-term earnings growth expectation of 4.3%. EXPD delivered a trailing four-quarter earnings surprise of 11.6%, on average.Zacks Names #1 Semiconductor StockIt's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Avis Budget Group, Inc. (CAR): Free Stock Analysis Report Expeditors International of Washington, Inc. (EXPD): Free Stock Analysis Report Deutsche Lufthansa AG (DLAKY): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks