Avis Budget Loss Narrows, but Outlook Mixed

Avis Budget Group Inc.'s (CAR) fourth-quarter loss narrowed as the car-rental company reported higher volume in North America and markets abroad, though the company issued a mixed outlook for the new year.

Avis is coming off a strong 2012, when results were aided by a robust domestic used-car market early in the year that helped keep fleet costs low. Sales for the year soared 25%, as the company also benefited from a $1 billion deal to take full control of Avis Europe in October 2011. But top-line growth this year is expected to slow considerably for Avis as it faces a lofty comparison.

The company is staying on an acquisitive path, last month unveiling a $500 million deal to buy its car-sharing operator Zipcar Inc. (ZIP). That deal, expected to close by April, would vault Avis ahead of its peers in addressing the niche hourly rental market.

Excluding the pending acquisition of Zipcar, Avis sees 2013 adjusted earnings of $1.90 to $2.45 a share on revenue of about $7.6 billion to $7.8 billion. Analysts surveyed by Thomson Reuters expected a profit of $2.48 a share on $7.59 billion in revenue.

For the fourth quarter, Avis reported a loss of $46 million, or 43 cents a share, compared with a prior-year loss of $170 million, or $1.62 a share. Excluding transaction-related costs and other impacts, the adjusted loss narrowed to 7 cents a share from 14 cents. Revenue jumped 4.2% to $1.7 billion.

Analysts surveyed by Thomson Reuters expected a per-share loss of 7 cents on revenue of $1.63 billion.

Revenue growth in the latest quarter was driven by rental day volume gains. Ancillary revenue, excluding gas and customer recoveries, jumped 8% due to higher sales of insurance products and emergency roadside protection.

North American car rental revenue increased 4.8% as volume jumped, offsetting a slight decline in pricing. Avis said pricing improved throughout the quarter, and was up 1% in December.

Rental revenue grew 3.4% internationally, as volume growth offset lower pricing partially due to the strong growth of the Budget brand in Europe. Avis is expanding the Budget brand abroad by adding new rental facilities and targeting small- and medium-sized businesses as part of a new branding strategy.

Shares were up 0.9% to $23.26 after hours. The company's conference call is scheduled for Thursday.

-Write to John Kell at [e-mail]

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