Hertz car rental bankruptcy.
How can a company with “only” $9 billion in annual revenue even think it will ever be able to pay off ~$17 billion in debt? Their debt load is almost twice as much as their annual revenue. Either way, even before the virus situation, the expected average annual earnings (profit) of a Fortune 500 company is around 8-10 percent of annual revenue. So, let’s round that up to an easy to compute $1 billion in earnings/profit. It would have taken them 17 years to fully eliminate that debt, assuming all of those 17 yrs would be fully profitable at ~10% revenue. But, their annual earnings in the past several years were nowhere near 10%. In fact, they lost money in the recent yrs due to their debt maintenance, as well as loss of market share to Uber/Lyft/Enterprise/Avis. And, of course, they now won’t be likely to meet that “ultimate” ~8-10% earnings goal in the future either.
The outcome of their filing for bankruptcy is two sided, and it’s advantageous for some, and not for others:
If you are in the used car buyers market (like I am), apparently this will cause a ton of their vehicles to be put into the used car marketplace, depressing the price of a used car, so one should be able to pick up a used car in the (near?) future, at a cheaper price than currently.
On the other hand, if you were thinking of selling/trading in your car in the future, do it now, since as just noted, you‘ll get more $$ now, than you’ll get later this summer/year due to the fall out of the Hertz bankruptcy.
That’s it for today’s virus bankruptcy report. Tomorrow, we’ll be talking about JC Penny.
[no, we’re not: today’s report was just a one time only analysis by someone who thinks he understands big business – lol]
P.s., don’t buy any car rental stocks right now. 😱🙄😉🤓🚗🚙🚘
