Avis $CAR ( ▼ 2.32% ) saw its market value crater after reporting a disastrous fourth quarter that management itself labeled “unacceptable.” The earnings miss was so severe that it wiped out roughly $1 billion in market cap in a single session and dragged the broader rental car industry down with it.
Adjusted EBITDA came in at just $5 million, a staggering shortfall compared with analysts’ expectations of about $145 million. For a company heavily tied to travel demand, the results signaled a sharp deterioration in operating conditions.
Flights canceled, profits grounded
Much of the damage stemmed from disruptions in air travel. Commercial rental days dropped 11% in November after widespread flight cancellations tied to a government shutdown. With fewer travelers arriving, demand for rental vehicles fell sharply.
Avis responded by shrinking its fleet during the quarter, but the timing was brutal. The fourth quarter is typically the toughest period to sell used cars, meaning the company had to offload vehicles into a weak market. It also recorded a massive $500 million write-down on its electric vehicle fleet, further crushing profitability.
No spin, no excuses
CEO Brian Choi took an unusually blunt tone on the earnings call, acknowledging the company had fallen far short of its own guidance. He said the results left management without the credibility to focus on long-term strategy until operational performance improves.
The pain may not be over. Avis warned that first-quarter earnings are likely to decline further, citing continued travel disruptions in January due to severe weather.
Contagion hits rivals too
The sell-off didn’t stop with Avis. Shares of Hertz $HTZ ( ▼ 3.41% ) plunged alongside it, dropping more than 14% as investors reassessed the outlook for rental demand across the industry.
The episode highlights how sensitive rental car companies are to travel volatility. When flights get canceled, business evaporates almost instantly, leaving companies with idle vehicles, falling utilization rates, and rapidly shrinking profits.