Shares of Hertz Global Holdings Inc. HTZ, -1.35% fell 4.7% in premarket trading Thursday, after the car rental company beat earnings expectations but reported a big drop in margins as intentionally elevated maintenance costs addressed out-of-service levels. Net income rose to $577 million, or $1.33 a share, from $571 million, or $1.13 a share, in the year-ago period. Excluding nonrecurring items, adjusted earnings per share fell to $1.08 from $1.20, but topped the FactSet consensus of $1.05. Revenue grew 12.1% to $2.50 billion, topping the FactSet consensus of $2.46 billion. Monthly revenue per unit reached a quarterly record of $1,685. Expense growth was more than double revenue, rising 26.8% to $1.85 billion, as operating profit as a percent of revenue contracted to 25.9% from 34.5%. “During the first two months of the quarter, the Company ran with intentionally elevated maintenance cost to address out of service levels. As a result of these efforts, by September, utilization had reached 81.4%, and maintenance cost receded such that the business experienced more typical operating cost leverage,” the company said. The stock has climbed 8.4% over the past three months through Wednesday while the S&P 500 SPX, -0.36% has lost 4.8%.
