Hertz's Earnings Turnaround: A Strategic Rebuild Positions the Company for a $1 Billion EBITDA Future

The recent earnings report from Hertz Global Holdings has ignited a wave of optimism among investors, marking a pivotal moment in the company's long-term transformation. For years, Hertz has been synonymous with financial distress, burdened by a bloated fleet, high debt, and eroding margins. Yet, its second-quarter 2025 results—its first positive Adjusted Corporate EBITDA in seven quarters—signal a disciplined and methodical rebuild. This turnaround is not a fluke but the culmination of strategic operational discipline, fleet optimization, and margin recovery, all of which position Hertz to achieve its ambitious $1 billion EBITDA target by 2027.

Operational Discipline: The Foundation of Renewal

Hertz's transformation began with a ruthless focus on cost control and asset management. The company's depreciation per unit per month (DPU) has fallen to $251, a 16% improvement over its internal target of sub-$300. This achievement reflects a disciplined approach to fleet rotation, with 80% of the core U.S. rental fleet now less than a year old. By reducing the average age of its vehicles, Hertz has not only lowered maintenance costs but also enhanced customer satisfaction, as evidenced by a 11-point year-over-year increase in its Net Promoter Score.

The company's liquidity position further underscores its operational rigor. With $1.45 billion in cash reserves, Hertz has the flexibility to navigate macroeconomic uncertainties while continuing to invest in its transformation. This financial buffer is critical in an industry where supply chain disruptions and vehicle recalls can swiftly erode profitability.

Fleet Optimization: A Strategic Edge in a Competitive Market

Hertz's fleet management strategy has been a cornerstone of its revival. By securing its Model Year 2025 fleet at pre-tariff pricing, the company has insulated itself from inflationary pressures that have plagued competitors. Additionally, its vehicle utilization rate has climbed to 83%, a 300 basis point improvement year-over-year. This efficiency is not merely a function of tighter supply but a reflection of Hertz's ability to align its fleet size with demand.

The company has also embraced digital tools to enhance fleet optimization. A multiyear partnership with Amadeus to modernize its revenue management system is expected to yield real-time pricing adjustments and localized market insights. These capabilities are particularly valuable in an industry where demand fluctuates rapidly, and pricing precision can determine profitability.

Margin Recovery: From Losses to Profitability

Hertz's margin recovery is perhaps the most compelling evidence of its turnaround. In Q2 2025, the company achieved a positive EBITDA margin, a stark contrast to the nearly two years of losses that preceded it. This improvement was driven by a 3% year-over-year decline in direct operating expenses (DOE) and a 16% reduction in DPU. The company's “buy right, hold right, sell right” strategy—focusing on acquiring the right vehicles, holding them for optimal periods, and selling them at peak residual values—has been instrumental in this recovery.

Looking ahead, Hertz expects its EBITDA margin to remain in the mid to high single digits in Q3 2025, with positive EPS anticipated for the first time since 2023. Analysts at Jefferies project $905 million in EBITDA for 2025, a trajectory that aligns with the company's $1 billion 2027 target. While Goldman Sachs remains cautious, citing persistent pricing pressures and a high debt load, the broader market appears to be taking notice: Hertz's stock surged 12.57% pre-market following its Q2 earnings report.

Industry Trends and Long-Term Catalysts

The rental car industry itself is evolving, with trends that favor Hertz's strategic direction. The U.S. market is projected to grow at a 4.34% annual rate through 2030, reaching $40.52 billion in revenue. Online bookings, now accounting for 71% of revenue, are expected to dominate further, a shift Hertz is well-positioned to capitalize on through its digital innovations.

Moreover, the rise of electric vehicles (EVs) and autonomous mobility presents a long-term opportunity. Hertz's CEO, Gil West, has emphasized the company's potential to lead in the AV and robotaxi markets, leveraging its fleet management expertise and brand recognition. While these initiatives are still nascent, they align with broader industry trends toward electrification and shared mobility.

Risks and Realities

No turnaround is without its challenges. Hertz's $18.9 billion debt load remains a significant overhang, and its debt-to-capital ratio of 0.91 limits financial flexibility. Additionally, the company must navigate ongoing supply chain bottlenecks and the risk of fleet recalls, which currently affect 2% of its U.S. rental fleet.

However, these risks are being mitigated by Hertz's strategic focus on asset efficiency and cost discipline. The company's ability to reduce DPU and improve utilization demonstrates that it can generate value even in a constrained environment.

Investment Implications

For investors, Hertz's journey represents a high-conviction turnaround story. The company's progress in operational discipline, fleet optimization, and margin recovery has laid a solid foundation for long-term value creation. While the path to $1 billion in EBITDA by 2027 is not without risks, the alignment of management, industry trends, and financial metrics suggests that Hertz is on the right trajectory.

Investors should monitor Hertz's ability to maintain its EBITDA momentum in the coming quarters, particularly as it navigates macroeconomic headwinds. Those with a long-term horizon may find the company's strategic initiatives and industry positioning compelling, especially as it continues to refine its digital capabilities and explore new mobility opportunities.

In conclusion, Hertz's earnings turnaround is more than a short-term rebound—it is a testament to the power of disciplined execution in a cyclical industry. For those willing to bet on a company that has turned its ship around, the rewards could be substantial.