Hertz Gives Back Earnings Pop as Index Exit and Lawsuits Mount

Hertz Global Holdings has endured one of the most volatile stretches of any name in the rental sector this month. Shares jumped nearly 28% on August 7 after second-quarter results came in well ahead of expectations, with an adjusted loss of 11 cents per share against a consensus loss of 24 cents and revenue of $2.40 billion, up 10% year over year.

The relief was short-lived. A securities class action was filed alleging the company misrepresented its liquidity position and the persistence of weakness in the used-car market between May 7 and June 23. Separately, S&P Dow Jones Indices removed Hertz from the S&P SmallCap 600 on August 5, saying it no longer met the index criteria, a change that typically forces selling from index-tracking funds.

Sell-side sentiment has followed the news flow lower. Jefferies cut its price target to $2 from $6, while Barclays moved to $1 with an underweight rating. The gap between the operating improvement shown in the quarter and the balance-sheet and legal overhang remains the central question for the stock.