Pershing Square Challenge 2013: Long Hertz Presentation

Pershing Square Challenge 2013: Long Hertz Presentation

Pershing Square Challenge: Long HTZ presentation

  • We recommend investors buy Hertz (HTZ) stock with a target share price of $36.00, which represents ~52% upside from the current share price


Four Main Points to Investment Thesis


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  • §   The market significantly underestimates the impact of Hertz’s recent merger with Dollar Thrifty, which marks the completion of a ten-year consolidation that dramatically improves the competitive dynamics of the industry


  • §   The market underestimates the levers Hertz can pull to counter the negative impact of falling used car prices


  • §   Hertz has strong revenue growth opportunities in the U.S. and will realize significant revenue and cost synergies through its acquisition of Dollar Thrifty


  • §   Divestiture of non-core Equipment Rental business would unlock substantial value by deleveraging the balance sheet
  • §   Car Rental (2012 rev: $7.6bn): Operates through theHertz, Dollar and Thrifty brands. Rents cars that the company owns or leases. Maintains a substantial network of car rental locations both in the United States and internationally, and the largest number of airport car rental locations in the world


  • §   Equipment Rental (2012 rev: $1.4bn): Operates throughHERC brand. Rents a broad range of industrial, construction and material handling equipment. Also sells new equipment and consumables. One of the largest equipment rental companies in North America
  • §   Hertz’s acquisition of Dollar Thrifty marks the completion of an industry consolidation that, over the past ten years, has gone from six separate rental car companies to only three today


  • §   The three remaining players now have incentive to focus on profitability instead of market share


Overly Conservative Pricing Guidance


  • §    Management’s revenue and EPS guidance assumes no pricing growth


  • §    Sell-side analyst consensus estimates assume a 1% increase in pricing



On pricing, it’s very conservative assumptions where we really don’t try to assume any price increases in our models.


– Hertz CEO in April 2013

One of the headlines I’d like to make is we don’t want to gain share by reducing price. We want to gain share by increasing value, and that’s how we’re doing it.


– Hertz CEO in April 2013



We’re seeing our competitors move for profitability, rather than share, and that has a positive impact on all of us.”


– Avis CFO in February 2013


Pershing Square Challenge full PDF below

138560430-Columbia-Business-School-s-Pershing-Square-Challenge (1)


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