HTZ Q2 Deep Dive: Fleet Rotation and Cost Focus Drive Improved Performance Amid Ongoing Transformation

Global car rental company Hertz (NASDAQ:HTZ) beat Wall Street’s revenue expectations in Q2 CY2025, but sales fell by 7.1% year on year to $2.19 billion. Its non-GAAP loss of $0.34 per share was 17.4% above analysts’ consensus estimates.

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StockStory’s Take

Hertz’s second quarter results showed meaningful operational progress compared to last year, with management attributing improvements to disciplined fleet management and rigorous cost controls. CEO Wayne Gilbert West highlighted “positive adjusted corporate EBITDA for the first time in seven quarters,” driven largely by a smaller, younger fleet and improved vehicle utilization. Management emphasized the importance of their “Buy Right, Hold Right, Sell Right” strategy, which has led to higher proceeds from vehicle sales and lower depreciation expenses. While sales volumes declined, Hertz’s ability to optimize its asset mix and reduce direct operating costs per transaction day signaled early success in its transformation plan.

Looking ahead, Hertz’s forward outlook is shaped by a continued emphasis on pricing optimization, technology upgrades, and maintaining flexibility in fleet size to adapt to changing demand. Management is focusing on implementing a new revenue management platform, with Chief Commercial Officer Sandeep Dube stating, “Our next major upgrade remains on track for deployment at the end of Q3.” The company also flagged ongoing supply chain uncertainties and potential shifts in travel demand, but expressed cautious optimism that improved pricing, cost efficiency, and digital initiatives can support further operational gains through the remainder of the year.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to progress in fleet rotation, enhanced vehicle sales channels, and operational efficiency gains, while also addressing continued challenges in pricing and demand.

• Fleet rotation and asset quality: Hertz accelerated its fleet rotation, selling off older, higher-depreciating vehicles and focusing on aligning fleet mix with customer booking patterns. This resulted in 80% of the U.S. rental fleet being less than a year old, which has lowered maintenance costs and improved customer experience.
• Retail vehicle sales channel expansion: The company achieved its highest second-quarter retail vehicle sales in five years, aided by partnerships such as Cox Automotive that enabled fully digital car sales transactions. Management highlighted that these initiatives are driving higher net proceeds from vehicle disposals and supporting ongoing fleet refresh efforts.
• Operational efficiency improvements: Direct operating expense per transaction day improved despite lower volumes, reflecting productivity gains, a younger fleet, and tighter cost discipline. Efforts in supply chain management and process optimization contributed to lower direct costs and better operational leverage.
• Technology modernization initiatives: Hertz began implementing a new revenue management system in partnership with Amadeus to replace its legacy platform. This upgrade, scheduled for deployment by the end of Q3, aims to introduce real-time pricing optimization and integration with capacity planning, which management believes will lead to better margin outcomes.
• Revenue diversification and loyalty growth: Management noted sequential growth in off-airport and mobility business units, as well as a 100% increase in new U.S. loyalty member sign-ups. Enhanced direct sales channels and loyalty engagement are seen as key drivers for future demand generation and improved customer retention.

Drivers of Future Performance

Hertz’s forward guidance centers on pricing recovery, margin expansion through technology, and maintaining a flexible approach to fleet investment amid industry uncertainty.

• Pricing optimization and technology: Management is prioritizing the rollout of a new revenue management platform to support dynamic, real-time pricing strategies. Sandeep Dube described the legacy system as “antiquated” and emphasized that the new system should enable more localized, data-driven decisions, which is expected to drive margin improvement as pricing conditions recover.
• Supply chain and fleet flexibility: Ongoing delays in acquiring model year 2026 vehicles and uncertainty around tariffs are prompting Hertz to maintain a cautious approach to fleet size. CEO Wayne Gilbert West noted the company is “maintaining flexibility as the industry continues to navigate any economic headwinds,” underscoring an intent to adjust investments as demand signals evolve.
• Diversification and channel expansion: Management sees growth potential in expanding off-airport, mobility, and direct-to-consumer retail channels. The company is investing in digital vehicle sales, loyalty programs, and rent-to-buy offerings, aiming to reduce dependence on traditional airport rental activity and broaden its customer base.

Catalysts in Upcoming Quarters

In the coming quarters, our team will monitor (1) the deployment and early results of Hertz’s new revenue management system, (2) sustained gains in operational efficiency and cost controls as fleet rotation continues, and (3) the pace of digital retail vehicle sales and loyalty program growth. We will also pay close attention to supply chain developments and how pricing recovery translates into margin expansion.

Hertz currently trades at $5.40, down from $5.58 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free).

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