February 27, 2018 / 10:10 PM / 8 months ago

Hertz reports bigger-than-expected loss on higher turnaround costs

(Reuters) - Hertz Global Holdings Inc (HTZ.N) reported a bigger-than-expected fourth-quarter loss amid efforts by the car rental company to turn around itself by spending more on fleet and technology upgrades and marketing initiatives.

Shares of the Estero, Florida-based company, which forecast elevated expenses in 2018, fell 6.5 percent to $18.00 in extended trading on Tuesday.

Total interest expense rose 20.3 percent to $172 million in the quarter, while selling, general and administrative costs increased about 4 percent to $221 million.

Vehicle and operating expenses were up 6 percent to $1.22 billion.

“We will have elevated investments throughout the year as we implement several, major technology conversions,” Chief Executive Officer Kathryn Marinello said in a statement.

“By 2019, we should begin to evolve toward a more competitive earnings profile.”

Marinello was appointed to the top job more than a year ago with backing from the company’s biggest shareholder Carl Icahn, who held a 34.95 percent stake as of Dec. 31.

She took over in 2017 from John Tague who overbought compact and mid-sized cars at a time when more American drivers were opting for SUVs. (reut.rs/2EUOROp)

As part of the turnaround plan, Hertz has been overhauling its rental fleet and investing more in technology upgrades of its app amid pressure from industry over-capacity and pricing.

The rise of car-sharing companies has also intensified competition for Hertz.

Hertz benefited from a one-time gain of $679 million due to changes in the U.S. tax law and reported net income from continuing operations of $616 million, or $7.42 per share, in the quarter ended Dec. 31, compared with a loss of $438 million, or $5.28 per share, a year earlier.

On an adjusted basis, Hertz reported a loss of 77 cents per share, above the average analyst estimate of 60 cents, according to Thomson Reuters I/B/E/S.

Total revenue rose to $2.09 billion from $2.01 billion, beating the analysts’ estimates of $2.06 billion.

Reporting by Ankit Ajmera in Bengaluru; Editing by Arun Koyyur

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