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Avis Budget Group

Avis is #3 in US car rental (#1 Enterprise, #2 Hertz). Avis purchased its European franchise for ~$1 bn in 2011 (~7.5x corporate EBITDA). That unit was separated in 1986 after a convoluted history of M&A/LBOs in the 1980s that included such names as Norton Simon, Esmark, Beatrice, KKR, Wesray, and an ESOP buyout of Avis. International represented 30% of revenues in 2Q18. Avis was pursuing the acquisition of Dollar Thrifty in 2011 but lost that deal to Hertz. In retrospect, losing was fortunate given the massive integration problems at HTZ tier to that overpriced, debt-financed deal. Avis bought Zipcar in 2013 ($473 mn net of cash) to leverage theoretical synergies in revenues, costs, and fleet utilization with a goal of becoming a leader in application-based mobility solutions. The theory then was the car sharing market would grow to $10 bn over the "next several years" with $3 bn in North America, $3 bn in Europe, and $4 bn in Asia. Since the acquisition, financial and operational transparency has been quite limited on Zipcar revenue and EBTDA growth. When acquired in 2013, Zipcar only contributed 3% of revenue for FY13 and an "insignificant" amount of EBITDA. (05 Sep 2018)

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US Inflation: Goods Inflation Is Back

Sector Analysis: 12 Dec 2018, 11:57 PM ET - Headline and core indexes both increased in line with expectations.  We highlight the first bought of YoY core goods inflation since 2016 and anecdotes of margin pressure from the most recent Beige Book.

US Employment: Modest Gains for Jobs & Wages

Sector Analysis: 09 Dec 2018, 9:01 PM ET - Payrolls and wages both took a step back in November.  We highlight this months employment data and discuss the possibility for manufacturing, construction, and mining employment to lead a 2019 deceleration in jobs growth.

US Income & Spending: Strong Start to 4Q Spending

Strategy Analysis: 30 Nov 2018, 4:37 AM ET - October consumer data delivered above expectations with strong real spending, solid income, and soft inflation.  We dig into the details and highlight strong growth in discretionary spending categories.

Consumer Pulse: Holiday Sales Update & More

Sector Analysis: 28 Nov 2018, 4:11 AM ET - Consumer holiday spending viewed through the e-commerce lens looks to be off to a strong start. The consumer economy has a mix of puts and takes, ranging from rising mortgage rates to falling prices at the pump.
Focused

Avis 3Q18: Quick Look

Earnings Note: 05 Nov 2018, 8:53 PM ET - Avis stock makes the usual post-earnings aftermarket trading stock noise, but the Americas segment EBITDA trend, free cash flow, steady investment, and relative lack of pressure on financial risk trends is the main event for CAR bonds.

US Employment: Almost Full, Keeps Eating

Strategy Analysis: 05 Nov 2018, 5:16 AM ET - Employment growth bounced back in October with a strong 250k print.  Wage growth hit a new high, but its gradual acceleration coupled with the strong job growth trend makes us question what full employment looks like.

US Productivity Is A Small Offset To Labor Costs

Sovereign Analysis: 02 Nov 2018, 5:38 AM ET - We break down 2 separate pieces of 3Q economic data that show while labor costs continue to rise, controlling for productivity growth gives a rosier picture. 

PCE Deflator: Steady in September

Worth Watching: 29 Oct 2018, 10:19 PM ET - PCE Deflator: The September income & outlays report showed another mild month for consumer price gains. The headline all-items index increased by 0.1% MoM, bringing the YoY rate to 2.0%, down from its July peak of 2.3%. The core PCE deflator (e ..

US GDP: Consumers Show Up Again

Strategy Analysis: 29 Oct 2018, 5:06 AM ET - 3Q US GDP beat expectations with a strong performance by the US consumer, inventory growth, and government spending offsetting weak trade, residential investment, and capex.

US Inflation: Consumer Prices Eke Out Another Gain

Strategy Analysis: 11 Oct 2018, 10:35 PM ET - The September consumer price index report showed weaker price gains than expected for the second consecutive month. 

US Strategy: What to Watch for on 3Q Earning Calls

Strategy Analysis: 11 Oct 2018, 4:37 AM ET - We surveyed our analyst teams for key sector level issues they will be paying close attention to with upcoming third quarter earnings calls beyond the typical sales, margins and earnings guidance. 

US Employment: 3.0% Wage Growth on the Horizon

Strategy Analysis: 05 Oct 2018, 12:24 PM ET - September nonfarm payrolls disappointed on the headline number, but under the surface, the report was solid.  Wages posted another strong gain and are just one tick away from the 3.0% YoY milestone.

US Income & Spending: Consumption Stays On Track

Strategy Analysis: 01 Oct 2018, 6:11 AM ET - The August income & spending report contained another solid reading for consumer spending, continued income growth, and modest inflation. We dig into the pricing environment for a few discretionary spending categories.
Focused

Avis: In the € Market

HY Note: 25 Sep 2018, 5:39 PM ET - Avis is in the market with €350 mn to refi and extend its liability structure while layering in euro debt in its growing European operation.

US Employment: Finally, A Wage Growth Surprise

Strategy Analysis: 07 Sep 2018, 4:06 PM ET - The August employment report contained the long-awaited breakout in wage growth to a new cycle high. Payroll growth was also solid, and we highlight our outlook for it going forward.

US Income & Spending: Inflation Momentum Fading?

Strategy Analysis: 30 Aug 2018, 2:43 PM ET - July consumer spending and income increased largely as expected, providing a solid start to 3Q spending. The core PCE deflator hit the Fed’s 2.0% target. We highlight that the recent inflation data have cooled some from earlier this year.
Focused

Avis 2Q18: Quick Look

Earnings Note: 07 Aug 2018, 6:53 PM ET - After a day of secondary pyrotechnics and short covering in Hertz, a steady 2Q18 seems anticlimactic from Avis, who held its free cash flow forecast for 2018 at a midrange of $350 mn with 8.5% EBITDA margin guidance for 2018.
Focused

Car Rental: Crossroads or Figure 8?

Sector Outlook: 06 Aug 2018, 11:13 AM ET - We frame key issues ahead of Hertz/Avis earnings week. Will 2018 provide a pause to get more critical execution risks addressed ahead of secular/cyclical pressure ahead? Do they get a 1-year reprieve on residual risk surprises?

Consumer/Pharma: Cross-Sector Rel Val Analysis

Sector Analysis: 19 Jul 2018, 4:27 AM ET - In this report, we juxtapose OAS and leverage levels across on-the-run non-cyclical credits in the F&B and Pharma space. M&A has elevated leverage for several names, so we aim to help investors find the best spread while managing risk.

July Beige Book: Tariffs Front & Center

Sector Analysis: 19 Jul 2018, 4:26 AM ET - We parse the July Beige Book for anecdotes on the impact of tariffs. It’s clear they’re contributing to rising input costs across the US.

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