Hertz Corp. (NYSE: HTZ) shares were down nearly 10% in response to a myriad of problems that have accumulated since its announcement that financial statements for the past two years will have to be corrected. The company’s stock took a plunge back in June of almost 17% when it made the initial announcement. Unfortunately, this is just one more of numerous cases in which companies confess that their financial books aren’t right and there ends up being other skeletons found in the closet later.
It seems as though the market just did not want to believe that a highly visible company like Hertz could have deep accounting issues. Hertz’s shares had handily recovered since the announcement in June, ultimately recovering to a 52-week high of $31.61 on Tuesday. Most likely investors believed that this was a one-time occurrence and that Hertz’s brand still remained strong.
Although rental car revenue increased 4% from last year’s quarter, the large number of vehicle recalls put a hamper on its fleet and operations. This resulted in Hertz’s announcement that the spin-off of its equipment-rental business would have to wait until next year.
A few other factors seem to indicate that there is more going on behind the curtain at Hertz. One of them being that the Rental Car Group President, Scott Sider, and Lead Independent Director, George Tamke, have announced their “retirement” in an SEC filing. In addition, the company withdrew its guidance for 2014.
Analysts did not have any better news to give to Hertz. J.P. Morgan downgraded Hertz to Neutral from Overweight and Deutsche Bank downgraded it a Hold.
Hertz shares were down 9% at $28.73 on well over 50 million shares with about two hours until the close. The Thomson Reuters price target is (or was) $30.44, and the 52-week range is $19.73 to $31.61.
Again, when companies enter the confessional booth to disclose that they have accounting irregularities or that their financial books can no longer be trusted, it just seems to bring problems for much longer periods than a few weeks or months.
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