Dollar Thrifty Automotive Group, Inc. (DTG): Zacks Rank Buy
This car company showed strong Q3
results and beat estimates across the board. Now with a new CEO, great rates
and increasing demand, they may be poised for another strong year after rising
53% over the past twelve months.
Company Description & Developments Unless
you’ve been living under a rock for the past couple years, you know that
consumers have been strained and taking more “stay-cations” than normal. There
no doubt is an itch among many of us to take a real vacation and maybe just
maybe rent a car in the process.
Even though growth is still slow,
Americans and corporations are spending more on travel.
This time around I wouldn’t expect
the general populous to splurge on first class plane tickets and high end luxury
auto rentals. Consumers are watching their budgets and looking for the best
deals and that is where a company like Dollar Thrifty comes in.
Dollar Thrifty Automotive Group,
headquartered in Oklahoma offers global automotive rental solutions in both the
traditional corporate structure as well as franchises of their Thrifty brand.
Their brands have been around since the mid 20th century (1965 Dollar and 1950
Thifty)
Between their Dollar and Thrifty
brands, they cover approximately 1,575 corporate and franchised worldwide
locations including approximately 600 in the United States and Canada. They
operate in virtually all of the top U.S. and Canadian airport markets and are
expanding globally.
They operate their business
without any corporate debt and a ton of liquidity. Through their partners such
as American Airlines, United, Southwest, Orbitz, Hotwire, Travelocity and more,
they are able to weave and combine their low cost rentals into natural travel
searches and online bookings.
Financial Profile Dollar Thrifty Automotive
Group is a mid cap company that is trading at about 16.6 times trailing earnings
(P/E). Looking forward, Zacks Consensus Estimates see Dollar Thrifty Automotive
Group P/E dropping to 15, with no change in price from these levels.
Dollar Thrifty Automotive Group was just upgraded to a Zacks
Rank 1 Strong Buy today.
Analysts have held their estimates steady over the past
month; however we did see upward revisions from several analysts over the past
90 days to the next quarter, current year and 2012 earnings projections.
Last quarter DTG reported sales growth of 1.84% year over
year and a jump of 14.32% over the previous quarter, so perhaps growth has been
accelerating as of late. They are expected to earn $4.80 in FY2011 according to
the Zacks Consensus Estimate.
Earnings Estimates
Expectations are for Dollar Thrifty Automotive Group to make 76 cents this
quarter when they report on February 23rd. Of the five analysts that cover
Dollar Thrifty, the consensus is for the company to grow earnings by 13.11% in
FY2011 and just slightly less (-3.00%) in FY2012.
Dollar Thrifty Automotive Group surprised analysts to the
upside by 7.5% last quarter, with the average earnings surprise being a positive
12.33%. They reaffirmed their earnings outlook in November 2011 for revenue
growth of 1 to 2 percent in FY2011.
There is also a bit of chatter about consolidation in the
industry and that Dollar Thrifty would be the last “prize” in the space, but I
wouldn’t base my investment on that data alone.
Market Performance &
Techincals Like most of our momentum stocks, Dollar Thrifty Automotive
Group has been strong over the past several months and is currently trading
about $12.00 under its 52 week high of $84.27. Overall, the patterns for DTG
are bullish. The stock remains in a bullish channel and firmly above its 50 and
200 day moving averages of $67.89 and $68.69 respectively.
It is important to note that this high beta stock has been
tightening its trading range recently and may be setting up for a big move.
Dollar Thrifty Automotive Group has also outpaced the S&P
500 by 51% over the past year and almost 15% over the past 3 months, but has
been basically flat against the index for the past month.
If the broad market turns lower, chances are that a stock
like DTG will exaggerate those moves, same goes for the upside, so use caution
if you think markets are due for a pullback.
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