Avis Falls Most Since 2008 After Missing on Profit Forecastby
Currency rates expected to trim earnings by 17 cents a share
Company also cites spending to improve customer experience
Avis Budget Group Inc. dropped the most in more than seven years after the car rental company forecast 2016 earnings that trailed analysts’ estimates, citing currency rates and spending to improve customers’ experience.
Adjusted earnings this year will be $2.70 to $3.30 a share, Avis said in a statement Tuesday. The average of nine estimates compiled by Bloomberg was $3.43. The company’s profit outlook included a 17-cent negative impact for currency rates. Executives also said on a conference call Wednesday that Avis expects pricing to be flat this year.
Avis is stepping up its one-way rental and self-service options to streamline the process for customers. The investments it’s making are “building blocks to help us grow our margins over time,” Chief Executive Officer Larry De Shon said on the call. “We won’t necessarily see that margin expansion in 2016, but we are putting in place the resources, the initiatives, the data analytics to get more granular -- particularly in our large costs and items -- to make sure we can grow our business and grow it more efficiently.”
The shares fell 27 percent to $22.04 at the close in New York, representing the biggest one-day drop since November 2008. They had already declined 17 percent this year through Tuesday.
Avis, which operates about 11,000 rental locations, also reported fourth-quarter adjusted profit of 18 cents a share, beating the 17-cent average of nine analyst estimates.