Hertz Global Holdings emerged from bankruptcy in June and is in great shape for 2022.
David Paul Morris/Bloomberg
This article is an excerpt from Barron’s 10 favorite stocks for 2022, published on Dec. 17. To see the full list, click here.
Rental cars are the best business in travel now, as auto shortages have led to strong pricing and high used-car prices.
Hertz Global Holdings (ticker: HTZ) and rivals Avis Budget Group (CAR) and privately held Enterprise—which control a combined 95% of the U.S. market—are cleaning up after years of mediocre returns.
Jeffries analyst Hamzah Mazari has said, “What once was a dysfunctional oligopoly with no pricing power is a functional oligopoly with pricing power.” Anyone who has rented a car since the spring can probably attest to that.
Hertz, which emerged from bankruptcy in June, is in great shape for 2022. It will have a clean balance sheet with minimal net debt (excluding asset-backed securities) after the payoff of high-rate preferred stock, and is taking profitable initiatives like the purchase of 100,000 Teslas by the end of 2022 and a deal to sell used cars through Carvana (CVNA).
Hertz shares, at about $21, are inexpensive, trading for less than nine times projected 2022 earnings. J.P. Morgan analyst Brinkman has an Overweight rating and a $30 price target, citing “strong industry tailwinds and a multitude of company-specific drivers.”
Recent Price
YTD Change
2021E EPS
2022E EPS
2022E P/E
Dividend Yield
Market Value (bil)
Amazon.com / AMZN
$3,377.42
4%
$41.11
$51.37
65.7
None
$1,713
AT&T / T
23.71
-18
3.38
3.17
7.5
8.8%
169
Berkshire Hathaway / BRK.A
454,550.00
31
17,466.30
18,928.50
24.0
None
673
General Motors / GM
58.39
40
6.73
6.93
8.4
None
85
Hertz Global Holdings / HTZ
21.01
-22*
4.02
2.55
8.2
None
10
IBM / IBM
125.93
5
10.05
11.04
11.4
5.2
113
Johnson & Johnson / JNJ
173.01
10
9.83
10.38
16.7
2.5
455
Nordstrom / JWN**
20.05
-36
1.27
1.99
10.1
None
3
Royal Dutch Shell / RDS.B
42.82
27
4.86
6.19
6.9
3.9
166
Visa / V***
214.37
-2
5.91A
7.04
30.5
0.7
467
*Since July 1. **Estimates for Jan. 2022 and Jan. 2023 fiscal year ends. ***Sept. fiscal year end. E=estimate. A=actual.
Source: FactSet
Write to Andrew Bary at andrew.bary@barrons.com
