RAC Stocks Slump after Dollar Thrifty 2007 Outlook

Shares of auto rental companies slumped recently following Dollar Thrifty Automotive Group's weaker-than-expected 2007 earnings outlook that sent its shares tumbling.

Dollar Thrifty recently slashed its adjusted 2007 per-share earnings forecast by about 50 percent to between 90 cents and 95 cents.

Morgan analyst Christina Woo said Friday that Dollar's estimates and equal-weight rating are under review. Lehman Brothers analyst Jeffrey Kessler said Monday the company's shares “were aptly getting 'sold' in the stock market today.”

However, the slip in Hertz Global Holdings Inc. and Avis Budget Group shares alongside those of their competitor is unwarranted, Kessler said.

Unlike Dollar Thrifty, most of Avis Budget's business is commercial rather than leisure-oriented and so experiences more consistent, if modest, pricing increases, Kessler said.

Dollar Thrifty has also been hurt by its reliance on Chrysler, which increased fleet costs, greater vehicle disposal losses from a weakening used car market and challenging conditions in its Canadian market, Kessler said.

Dollar Thrifty shares were down 36 percent at $16.75. Avis Budget Group Inc. stock fell 12 percent to $11.96 and Hertz Global Holdings Inc. stock dropped 5 percent to $14.26.

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