Goldman Sachs: Rental Industry Over-Fleeted

A warning by Dollar Thrifty Automotive Group Inc. about difficult revenue per day trends in the third-quarter helped contribute to a sharp drop in rental car company shares on Sept. 23, according to

Dollar Thrifty also warned investors about vehicle depreciation costs and said third-quarter results will be hurt by the bankruptcy of one of its tour operators.

Goldman Sachs analyst Christopher Agnew wrote in a note to investors that Goldman Sachs believed commercial travel volumes, which were slow going into the summer, have slowed further. The auto rental industry is over-fleeted, and pricing in September now appears to be below our initial expectations, Agnew wrote.

Dollar Thrifty said it is seeking an amendment to the allowed leverage under its senior secured credit facility. If that fails, the company plans to use some excess liquidity to repay a portion of its term debt to maintain covenant compliance.

Agnew expects weaker pricing and softer commercial volumes to hurt Avis Budget Group and Hertz Global Holdings, as well. He said fourth-quarter results are "uncertain" for all three companies, due to the weak U.S. economy and reductions in airline capacity.

Soleil Securities Group analyst Christina Woo wrote in a note Sept. 22 that third-quarter results are key to the leisure industry due to the seasonality of the car rental business, according to

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