Hertz Global's Q1 Results: A Narrowing Loss Masks Deepening Revenue Woes and Debt Risks

Hertz Global’s first-quarter earnings report, released on May 12, 2025, presents a paradox: a narrower adjusted loss of $1.12 per share, exceeding estimates, while revenue plunged 13% year-over-year to $1.81 billion. While this has fueled a 70% surge in its stock price since early 2025—driven by activist investor Bill Ackman’s 19.8% stake—the numbers beneath the surface reveal a company clinging to a recovery narrative that its fundamentals cannot sustain. The stock’s valuation now overstates Hertz’s fragile prospects, making it a prime candidate for a sell recommendation until operational metrics stabilize.

Revenue Decline Signals Structural Weakness

Hertz’s revenue slump is no fluke. The 13% year-over-year decline in Q1 2025 marks the sixth consecutive quarter of underperformance against analyst expectations. Even after slashing fleet capacity by 8% to reduce depreciation costs—a move that artificially inflated adjusted EBITDA—the company faces a brutal reality: moderating demand in corporate, government, and international segments, while leisure bookings barely offset the drop.

This trend is unsustainable. Hertz’s core model hinges on maximizing utilization of its 11,200 global locations, but weak demand and rising competition (e.g., from peer-to-peer rentals) are eroding its pricing power. Worse, its controversial EV experiment—a 2021 Tesla order of 100,000 vehicles—has left lasting scars: twice-as-costly EV repairs, plummeting residual values, and $2.9 billion in annual losses by 2024. While the company now claims 70% of its fleet is newer than 12 months old, the write-downs from its EV missteps continue to haunt cash flows.

Adjusted Loss Narrowing: A One-Time Trick, Not Turnaround

The reported “narrowing” adjusted loss of $1.12 per share is misleading. The improvement stems largely from a 45% year-over-year drop in vehicle depreciation costs, thanks to its “Buy Right, Hold Right, Sell Right” strategy—a tactic that involves dumping older, overpriced EVs at steep discounts. This is a one-time gain, not a sign of enduring profitability.

Analysts had already priced in most of these savings, yet Hertz still missed revenue estimates by nearly 10%. The adjusted loss remains deeply negative, and the path to positive EBITDA by Q3 2025—a goal repeated for years—depends on assumptions about fleet turnover and demand recovery that are increasingly optimistic.

Debt and Liquidity: A Time Bomb Ticking

Hertz’s debt remains its greatest liability. As of March 31, 2025, its total debt stood at $16.77 billion, with non-vehicle debt rising to $5.75 billion—a sign of growing reliance on expensive corporate borrowing. While recent refinancing deals extended maturities for $1.7 billion of its credit facilities to 2028, these moves merely delay the reckoning.

The company faces two critical hurdles:
1. Debt Covenants: Hertz must slash its leverage ratio to 3.50x by mid-2025 from 4.75x—a target that requires sustained EBITDA growth, which it has yet to demonstrate.
2. 2026 Maturity Wall: Over $2 billion in bonds come due in 2026, with unsecured notes trading at just 80% of face value—a stark reminder of investor skepticism.

Adding to the pressure are $320 million in make-whole payments to pre-bankruptcy bondholders and a $187.5 million lawsuit from warrant holders. With free cash flow negative for the fifth straight year, Hertz’s liquidity buffer of $1.2 billion is thin given its obligations.

Ackman’s Stake: A Band-Aid, Not a Cure

Ackman’s Pershing Square stake has boosted bond prices and share liquidity, but his influence is no guarantee of success. His past wins—e.g., with J.C. Penney—relied on turnaround strategies that Hertz’s leadership has yet to execute. The stock’s $6.84 price tag, nearly double analysts’ $3.31 average target, reflects irrational exuberance. Ackman’s involvement is a speculative bet, not a fundamental fix.

Conclusion: Sell Until Metrics Improve

Hertz’s Q1 results highlight a company still drowning in debt, revenue decline, and operational missteps. While the adjusted loss narrowed on paper, the drivers—depreciation cuts and EV fire sales—are temporary fixes. The path to sustainable profitability requires:
- A revenue rebound to pre-pandemic levels (unlikely amid weak demand).
- Debt reduction through EBITDA growth, which remains unproven.
- A credible plan to address its EV liabilities and fleet management flaws.

Until these conditions materialize, Hertz’s stock is a gamble. Investors should sell or avoid the stock until Hertz demonstrates consistent revenue growth, debt deleveraging, and a return to positive free cash flow. The risks—default, dilution, or further writedowns—are simply too great to justify today’s valuation.

In short, Hertz’s Q1 report is a mirage of progress. Beneath the surface, the company’s structural challenges remain unresolved, and its survival hinges on a recovery narrative that its own numbers continue to undermine.