For Immediate Release
Chicago, IL – October 13, 2010 – Zacks.com Analyst Blog features:Avis Budget Group Inc. (CAR), Dollar Thrifty Automotive Group Inc. (DTG), Hertz Global Holdings Inc. (HTZ), DineEquity Inc. (DIN) and Shutterfly Inc. (SFLY).
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Here are highlights from Tuesday’s Analyst Blog:
Avis’ Revised 3Q Outlook
Avis Budget Group Inc. (CAR) expects impressive third quarter results, thanks to the cost-saving initiatives as well as higher demand for its products. The company plans to announce its third quarter financial results early next month.
Avis expects its revenues to increase to about $1.5 billion in the quarter (up from $1.47 billion in the year-earlier quarter) and anticipates earnings before interest, taxes, depreciation and amortization (EBITDA) in the range of $210 million to $220 million (up from $165 million in the year-ago quarter).
The Zacks Consensus Estimate for third quarter 2010 earnings is 76 cents per share. For full-year 2010 and 2011, the Zacks Consensus Estimates are a respective 84 cents and $1.16 per share.
Pre-tax income, excluding certain items, is expected to range between $145 and $155 million. Moreover, the company also expects all three operating segments to report increases in revenues and adjusted EBITDA in the third quarter. Avis accounted the improvement in revenue in the Domestic Car Rental segment to an increase in rental days, but this was offset by a decline in time and mileage revenue per day.
Based on preliminary data, the company expects its cash balance to exceed $600 million and its corporate (non-vehicle-related) debt balance to be approximately $2.1 billion as of September 30, 2010.
Although Avis’ balance sheet is fairly debt-heavy, the company sold $400 million of debt to fund its potential acquisition of Dollar Thrifty Automotive Group Inc. (DTG). The notes due in 2019 yield 8.25% and will be classified as senior unsecured debt of subsidiary Avis Budget Car Rental LLC.
Avis has offered $53 per share in cash and stock for Dollar Thrifty. This includes $45.79 per share in cash and 0.6543 shares of Avis for each share of Dollar Thrifty. Last month, Avis Budget raised its offer from $40.75 as bidding with rival Hertz Global Holdings Inc. (HTZ) intensified.
We believe Avis’ strong focus on cost reductions will help it to achieve its goal of higher operating margins. With stabilization in travel volume, the combination of pricing and cost actions of the company will likely enhance its growth. The quantitative Zacks #3 Rank (short-term Hold rating) for Avis indicates no clear directional pressure on the shares over the near term.
DineEquity to Sell 56 Applebee’s
California-based DineEquity Inc. (DIN) announced on Monday that it has inked an agreement to sell 56 company-owned Applebee’s restaurants in Missouri, Illinois and Virginia for $38 million as a move to reduce debt burden and to build up a franchise-centric operation. In July 2010, DineEquity also announced the sale of 63 company-operated Applebee’s restaurants in Minnesota and parts of Wisconsin and expects to clinch the deal in fourth quarter 2010.
The sale of 36 restaurants in Missouri and Illinois will bring in after-tax proceeds of approximately $26 million, while the Virginia transactions will fetch $12 million. Management expects to close the Missouri and Illinois deal in first quarter 2011, whereas the Virginia transaction will be sealed in fourth quarter 2010. Mid River Restaurants LLC and Apple Investors Group LLC are the respective franchise partners in the Missouri and Illinois as well as Virginia deal. Apple American Group remained the franchisee for the Minnesota agreement.
Like most of the restaurant companies in the U.S., DineEquity is also shifting its focus toward franchised operations from company-owned restaurants as a de-risking strategy. The company acquired Applebee’s International in November 2007 in a $2 billion leveraged buyout. Since then, DineEquity has sold a total of 110 Applebee’s company-operated restaurants in five states and reduced its debt considerably by the use of free cash flow. As of June 30, 2010, long-term debt had reduced to 1,561.2 million from $1,637.2 million in December 2009. Shutterfly Upgraded to Outperform
We are upgrading our rating on Shutterfly Inc. (SFLY), a leading provider of Internet-based social expression and personal publishing service, to Outperform from Neutral. The rating was upgraded on a host of factors including better-than-expected earnings, seasonality of demand, continued margin expansion, strong demand for photo-book, and strategic partnerships.
Shutterfly is exhibiting strong growth in metrics as well as transacting customers, order volumes and value of the orders. Additionally, we expect continued growth in social media to be the key catalyst for the company’s growth over the long term. The recent success of Shutterfly’s Facebook application will sustain user growth in the company’s crucial fourth quarter. The company will be able to acquire new customers through the rapid growth of share sites.
Based on the above fundamentals, we expect the stock to fetch above-market returns and upgrade the stock from Neutral to Outperform. Shutterfly currently retains the Zacks #1 Rank, which translates into a short-term Strong-Buy rating.
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AVIS BUDGET GRP (CAR): Free Stock Analysis Report
DINEEQUITY INC (DIN): Free Stock Analysis Report
DOLLAR THRIFTY (DTG): Free Stock Analysis Report
HERTZ GLBL HLDG (HTZ): Free Stock Analysis Report
SHUTTERFLY INC (SFLY): Free Stock Analysis Report
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