Avis Budget stock surges in advance of earnings after analyst claims ‘big beat’ likely

Shares of Avis Price range Group Inc. surged Monday, immediately after Deutsche Financial institution analyst

Shares of Avis Price range Group Inc. surged Monday, immediately after Deutsche Financial institution analyst Chris Woronka boosted his earning estimate and stock price focus on a working day right before the rental motor vehicle company reveals 2nd-quarter results, saying a “big beat” is very likely.

The stock
Auto,
+3.83%
rallied 6.6% in afternoon investing towards a 7-week substantial. It is on keep track of for an eighth achieve above the past 10 periods, and has run up 28% through that extend.

The enterprise is scheduled to report next-quarter earnings on Tuesday, immediately after the closing bell. The FactSet consensus is for Avis to swing to earnings for every share of $2.35 from a decline of $5.60 a calendar year back, while profits is projected to increase 160% to $1.98 billion.

“The print is very likely to show a U.S. RPD [revenue per day] metric that is much earlier mentioned what marketplace observers (ourselves provided) would have thought achievable as just lately as early this yr,” Deutsche’s Woronka wrote in a note to consumers.

He raised is stock rate goal by 21%, to $91 from $75, when reiterating the hold ranking he’s experienced on Avis considering that October 2019.

Centered on “triangulation of admittedly limited information factors,” Woronka believes RPD for the quarter could be up close to 40% from the similar interval in 2019, prior to the pandemic, to his new estimate of $78.

“This would indicate a sizable conquer vs. market-facet consensus on equally the prime and bottom traces, but our sense is that a rising number of buy-side anticipations are closer to the revised numbers we are publishing currently,” Woronka wrote.

He nearly tripled his whole-yr 2021 EPS estimate, to $11.93 from $4.13, when lifting his profits estimate by 14% to $8.55 billion from $7.50 billion.

The two his new estimates are perfectly previously mentioned the FactSet consensus, for 2021 EPS of $6.58 and revenue of $7.67 billion.

Traders should continue to keep in head that major earnings beats do not normally translate into stock price tag gains.

Avis has crushed consensus quarterly bottom-line estimates by sizable margins the earlier three quarters: reduction for every share of 46 cents documented vs. FactSet decline consensus of $1.99 in Q1 2021 decline of 36 cents per share vs. loss anticipations of 64 cents in Q4 2021 and EPS of $1.13 vs. EPS consensus of 40 cents in Q32020.

Revenue also conquer expectations for every single of these quarters, but by a considerably narrower margin of an typical of 5.3% earlier mentioned the FactSet consensus.

In the meantime, the inventory fell on the working day following each individual of those people reviews ended up released, by an normal of 7.%.

Leading up to second-quarter outcomes, the inventory has slipped 1.7% around the past 3 months but had soared 136.2% year to date, whilst the S&P 500 index
SPX,
-.18%
has gained 5.2% the previous a few months and superior 17.2% this calendar year.

Considerations above the stock’s possible response is a single of the factors Woronka doesn’t advise getting the stock.

“We maintain our maintain ranking and consider volatility in the inventory is most likely to go on in the in close proximity to time period coming out of earnings,” Woronka wrote.