PARK RIDGE, N.J. — Hertz Corp. warned that it expects third- and fourth-quarter earnings to fall short of analysts' estimates because of competitive prices in the car-rental business and canceled flights at United Airlines.
The world's largest car-rental agency said it expects third-quarter earnings of $1.30 a share and fourth-quarter earnings of 51 cents a share. A First Call/Thomson Financial poll of eight analysts had an average estimate of $1.43 for the third quarter and 63 cents for the fourth quarter.
Plans to raise rental prices in the third quarter were scuttled by a "very competitive" market, the Park Ridge, N.J.-based company said. Hertz had announced in July that it would raise daily, weekend and weekly rates.
"We'll be looking for the right opportunity to increase prices because that's absolutely necessary in the U.S. car-rental business but, obviously, now is not the right time," said Hertz spokesman Richard Broome.
Hertz shares fell 25 cents to close at $30.63 on the New York Stock Exchange.. The news was released after the close of regular U.S. trading. The company's shares have fallen 24% over the last year.
Car rentals were also hurt by the labor dispute that forced UAL Corp.'s United Airlines to cancel or delay thousands of flights, Broome said. UAL reached a tentative pact with its pilots union last weekend.
Other factors contributing to the shortfall include weather-related airport disruptions, higher interest rates and unfavorable foreign-exchange rates, Hertz said.
Revenue in its U.S. car-rental business should rise 8% for the third quarter and 7% for the fourth quarter over the same periods in 1999, Hertz said. International operations should see revenue growth of 8% in each quarter, excluding currency effects, it said.
Hertz lowered revenue growth estimates for its equipment-rental division. The division is now expected to have revenue growth of 11% to 13%. Equipment rentals were hurt by a decline in construction activity, Hertz said.
The slowdown in business could result in some job cuts, the company said.
"We're looking at modest reductions," said Broome, without giving specifics. Hertz has almost 28,000 employees worldwide, he said.
Full-year earnings will be about $3.30 a share, Hertz said. Analysts had expected $3.49.