Rental Checkout

The nation’s car-rental companies, bloodied by years of price-cutting in an attempt to gain market share, have tried for several months now to hike prices instead and bolster their profits.

But Wall Street is hardly impressed. Consider: Over the last 12 months, Budget Group Inc.’s stock has plunged 64%. Shares of Avis Rent a Car Inc. are down 39%. Even shares of market leader Hertz Corp.--which also “leads the industry in price increases,” according to Merrill Lynch--show a 1% loss for the last year, though they are up 12% since late October.

What’s the problem?

Rental-car prices are going up, and so are the companies’ earnings, but “investors’ expectations were too high,” said Robert Napoli, an analyst with investment firm ABN AMRO in Chicago. “Investors had dreams of skyrocketing prices and earnings.”

Rental prices are up 2% to 3% over last year, “which isn’t bad in a noninflationary environment,” Napoli said. But that’s disappointing for investors, who also are now worried that if the U.S. economy goes into a recession next year, it will dampen business travel and the rental-car companies’ earnings, he added.

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James F. Peltz can be reached via e-mail at james.peltz@latimes.com.