Leading global car rental company, Avis Budget Group Inc. CAR is scheduled to report third-quarter 2017 results after the market closes on Nov 6.

Last quarter, the company witnessed a negative earnings surprise of 84.31%. Avis Budget missed earnings estimates thrice by a wide margin in the last four quarters, with a negative earnings surprise of 24.97%.

Let’s see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model conclusively shows that Avis Budget is likely to beat earnings this quarter as it possesses the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is perfectly the case here as you will see below:

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +2.55%, with the former pegged at $3.02 and latter at $2.95. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Avis Budget Group, Inc. Price and EPS Surprise

Avis Budget Group, Inc. Price and EPS Surprise | Avis Budget Group, Inc. Quote

Zacks Rank: Avis Budget has a Zacks Rank #2. This combined with a positive ESP make us reasonably confident about an earnings surprise.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Factors Driving the Better-than-Expected Results

During the quarter, Avis Budget forayed into the Latin American market by launching Zipcar services in Costa Rica. The strategic move is part of the international expansion plans of the company, whereby it aims to extend its presence in all the premier locations of the world. Zipcar, the leading car-sharing network and subsidiary of Avis Budget, already has significant presence in over 500 cities and towns across Europe, Asia and North America. By expanding footprint in the Latin American countries, it has widened its global network and coverage to almost all the major regions of the world.

Avis Budget also entered into the Nordic countries by launching its services in Reykjavik, Iceland. Reykjavik has a high level of car ownership in the world with a car for every 1.5 inhabitant of the city, per the World Health Organization’s Global Status Report on Road Safety 2015. In order to reduce pollution from such a huge number of cars, the government has set the target of becoming the world’s first carbon-neutral city by 2040 by encouraging people to use more of public transport facilities, cycling or even walking. This gives Avis Budget an ideal platform to capitalize on the huge revenue generating potential of this region.

Furthermore, Avis Budget intends to aggressively increase the number of company-operated locations in fast-growing markets. The company is particularly focused on expanding its Budget brand, taking its multi-brand strategy to the next level. We think that its fundamental drivers, such as sustained productivity growth, implementation of pricing initiatives and potential revenue-generating synergies from its various acquisitions bode well for the future.

However, Avis Budget continues to face hurdles like high fleet costs and unfavorable currency headwinds. Evidently, the company’s earnings for the earlier quarters were hurt by high fleet costs in both its segments and adverse currency movements in the International segment. The company is progressing well with its disciplined pricing initiatives and expects these to offset the rising fleet costs.

Other Stocks to Consider

Here are some other companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Westlake Chemical Corporation WLK has an Earnings ESP of +2.40% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

DISH Network Corporation DISH has an Earnings ESP of +1.68% and a Zacks Rank #3.

Versum Materials, Inc. VSM has an Earnings ESP of +9.47% and a Zacks Rank #3.

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Avis Budget Group, Inc. (CAR): Free Stock Analysis Report
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