Highlights of Blue Ridge Capital’s 4Q14 Holdings (Part 11 of 12)
Blue Ridge Capital and Avis Budget Group
Blue Ridge Capital has exited its position in Avis Budget Group (CAR). The investment represented 1.51% of the hedge fund’s overall portfolio in 3Q14. The fund sold 2,326,850 shares worth $127 million, as per the latest 13F filings for 4Q14.
Avis Budget Group is a leading global provider of vehicle rental and car sharing services. It operates through three brands:
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Avis
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Budget
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Zipcar
Avis and its licensees operate Avis and Budget brands in more than 175 countries. Avis Budget Group has a rental fleet of 545,000 vehicles.
Avis gets recognition for service excellence
The 2014 World Travel Awards recognized Avis as the world’s leading car rental company and the world’s leading luxury car rental company. The company’s website, Avis.com, was recognized as the world’s leading car rental company website.
2015 outlook
The company’s North America revenue is expected to increase by 6% to 8% in 2015. Avis is expected to face headwinds from changes in currency exchange rates. The effect of currency movements is expected to be 5 points of revenue growth.
The company’s upper level EBITDA (earnings before interest, tax, depreciation, and amortization) guidance is $1 billion. Double-digit growth for Budget in Europe and the acquisition of the licensee for Scandinavian Avis and Budget will mainly drive international revenue. The licensee is expected to generate ~$100 million in revenue. Diluted EPS (earnings per share) is expected to grow by 6% to 27% up to $3.15 to $3.75. The free cash flow is expected to be $450 to $525 million.
Expansion of Payless and Zipcar
During 2014, Avis Budget Group added 60 new locations to its Payless brand in North America. The company merged the Payless brand to its existing partnerships, including Southwest Airlines (LUV).
The result was a 15% year-over-year (or YoY) increase in Payless’s revenue in 4Q14 alone. The company is planning to expand Payless in 25 more North American locations in 2015.
Avis expanded Zipcar to 44 more colleges and universities. The company also launched Zipcar in Paris and Madrid. In 2015, Zipcar will be launched in the Australia and European markets.
You can gain exposure to the Avis Budget Group by investing in the iShares Russell 1000 Growth ETF (IWF). Avis Budget Group accounts for 0.06% of IWF.
In contrast, Southwest Airlines has a 1.61% exposure in the Industrial Select Sector SPDR Fund (XLI). XLI tracks the performance of 66 publicly listed companies in the industrial sector.