Avis Budget (CAR) To Report Q1 Earnings: Is A Beat In Store?

Avis Budget Group, Inc. (NASDAQ:CAR) is slated to report first-quarter 2018 results on May 2, after market close.

The top line is expected to benefitfrom strong volume growth, stringent cost-cutting initiatives coupled with increased efficiency in business. Seasonality and tax charges on cumulative foreign earnings are likely to hurt the bottom line.

We observe that shares of Avis Budget have rallied 59.7% in the past year compared with the S&P 500’s and industry’s gain of 11.8% and 1.4%, respectively.

Revenue Expectations Encouraging

The Zacks Consensus Estimate for revenues for the to-be-reported quarter stands at $1,951 million, reflecting year-over-year growth of 6.1%. The top line is likely to benefit from strong volume growth, improved efficiency in business and stringent cost-cutting initiatives. All the segments are expected to perform better in the to-be reported quarter.

The consensus estimate for Americas segment revenues is pegged at $1,333 million, indicating year-over-year growth of 1.4%. In fourth-quarter 2017, segment revenues increased 2.9% year over year to $1,382 million.

The Zacks Consensus Estimate for International segment revenues is pegged at $599 million, indicating year-over-year growth of 14.1%.In fourth-quarter 2017, segment revenues improved 18.8% to $637 million.

In fourth-quarter 2017, total revenues improved 7.5% year over year to $2,019 million.

Bottom Line to Decline Year Over Year

The Zacks Consensus Estimate for the to-be-reported quarter is pegged at a loss of $1.07 per share, indicating year-over-year decline of 13.8%.

The company’s earnings are likely to be negatively impacted by seasonality in vehicle rental business that results from changing customer demand. Tax charges on cumulative foreign earnings are likely to act as another negative catalyst, which are expected to partially offset the tax benefits from the new tax (Tax Cuts and Jobs Act) law. In fourth-quarter 2017, the company faced a $104 million one-time tax charge on cumulative foreign earnings.

In fourth-quarter 2017, adjusted earnings were 45 cents per share compared with 15 cents in the prior-year quarter. The company witnessed a tax benefit (as a result of lower tax) of $213 million.

Our Model Suggests a Beat

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided, especially if they have a negative Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Avis Budget has an Earnings ESP of +3.74% and a Zacks Rank #2, a combination that increases the odds of an earnings beat.

Other Stocks to Consider

Here are some stocks from the broader Business Services sector that investors may consider as our model shows that these have the right combination of elements to beat on earnings in first-quarter 2018:

Mastercard Incorporated (NYSE:MA) has an Earnings ESP of +0.03% and a Zacks Rank #2. The company is slated to report quarterly numbers on May 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

WEX Inc. (NYSE:WEX) has an Earnings ESP of +0.44% and a Zacks Rank #2. The company is slated to report quarterly results on May 3.

FLEETCOR Technologies, Inc. (NYSE:FLT) has an Earnings ESP of +0.79% and a Zacks Rank #2. The company is slated to report quarterly numbers on May 3.

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