August 15, 2011 - Avis Budget Group, Inc. (CAR-NYSE) provides car and truck rentals, and ancillary services to businesses and consumers in the United States and internationally. The company supplies rental cars to the premium commercial and leisure segments of the travel industry under the Avis brand name; and to the value-conscious segments of the industry under the Budget brand name.

The company also operates or franchises approximately 1,800 car rental locations in the Budget System worldwide. In addition, it operates local and one-way truck rental businesses under the Budget trucks brand in the United States. The Budget truck rental business has a combined fleet of approximately 29,000 trucks, which is rented through a network of approximately 2,300 dealers and 250 company-operated locations in the continental United States. Budget did 31% of 2010 sales and Budget Truck contributed 7%.

As of December 31, 2009, rental fleet totaled approximately 350,000 vehicles, and completed 23 million vehicle rental transactions in the United States, Canada, Australia, New Zealand, Latin America, the Caribbean, and parts of Asia.

At the end of 2008, you could have bought as much Avis as you wanted....for 40 cents a share. Then in early 2009, you could have bought more at 30 cents. It's come a long way since those dark days. And for good reason.

While earnings were negative in '08 and '09 (- 49 cents and - 4 cents respectively), they've moved quickly into positive territory. In 2010, they finished at 90 cents. This year, 7 analysts have a consensus opinion of $1.53 a share, then see $1.77 for 2012. Third quarter results will be out in November. Look for 99 cents compared to 78 cents.

Second quarter numbers were just released. They set a record with revenues up 9% and margins increasing 600 basis points, excluding certain items. Domestic rental volumes gained by 9% at airports and 7% in local markets. Net income was $52 million vs $26 million last year in the second period. Without extraordinary items, earnings were 63 cents a share vs 31 cents that analysts' estimated and 25 cents last year in the same period. Volume was higher but prices were off by 2%.

The biggest story on Avis over the last several months was its potential purchase of Dollar Thrifty, a competitor. But management has chosen another road: it's buying Avis Europe, a company it owned until 1986, then sold. Avis is paying about $1 billion for Avis Europe. Both shareholders have approved the purchase. It should close at the beginning of October, subject to regulatory and court approvals which management expects to be given.

Avis Europe is much bigger than Europe. It rents vehicles in Africa, the Middle East, and Asia. Those are established, growing markets. Avis will use these to establish a strong market presence, then expand into neighboring, growing economies. Sales are expected to improve by 5.4% this year, to $5.47 billion, then go to $5.74 billion next year (does not include the new acquisition).

Essential numbers: Market Cap is $1.34 billion. Trailing P/E is 13.16 while Forward P/E is 7.2. Operating margin for the last 12 months was 13.85%. Profit margin was 2.32%. Return on assets was 3.86%. Return on equity is worth repeating: a remarkable 33.03%. Price to book is 2.51. Book value is $5.05. There's $645 million in cash for $6.14 a share. Total debt is $8.79 billion. Current ratio is .56. Beta is an extraordinary 5.44. The stock is up 26.6% in the last 52 weeks. There are 105.02 million shares Outstanding with a Float of 80.15 million. Insiders own 10.57% of the stock. Institutions have 103% of the Float. There is no dividend.

Recently, with the market's extreme volatility, Avis dipped into the $12 range. That's a 40% correction from the high set earlier this year. With a better focus on its own brand and a global market presence, look for Avis to show better results. Just remember that the high amount of debt can swing earnings dramatically.

- Company Web site: www.avisbudgetgroup.com

   Ted Allrich