Investing.com - Avis Budget (NASDAQ:CAR) Group is suffering from an increase in costs, which has prompted Gimme Credit to downgrade its credit stance on the car rental giant this year.
Gimme Credit, a leading provider of independent corporate bond research, cut its credit stance to ‘deteriorating’ from ‘improving, while reducing its credit score to -1 from +1, according to a note dated Feb. 21.
“Avis Budget Group is experiencing a return to more normal seasonal demand post-the COVID-related travel binge. However, a significant increase in fleet costs (including vehicle interest expense) is weighing on adjusted EBITDA with this trend likely to last at least through the end of 2024,” the group said, in a note.
Avis is de-fleeting to keep the size of the fleet just under demand, the analysts said, to help mitigate the situation.
“Although rental demand continues to hold firm, we are concerned about higher per-unit fleet costs and lower used vehicle residual values,” Gimme Credit said.
Avis reported mixed fourth-quarter results earlier this month, as earnings beat, but revenue fell short of estimates despite improved rental demand.
The company's liquidity position at the end of the quarter was over $800 million with approximately an additional $900 million of fleet funding capacity.
At 10:15 ET (15:15 GMT), its stock traded 0.1% higher at $106.37, but is over 40% lower year-to-date, and down over 50% in the last year.