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In an effort to streamline its operational activities and enhance customer experience, leading general-use vehicle rental company Avis Budget Group Inc. (CAR) recently announced the addition of 235 new positions at its Business Support Center (BSC) in Budapest.

The move was appreciated by investors, as reflected in the share price of this stock, which closed at $17.51 on October 15, 2012, 3.12% higher than the previous close of $16.98, after reaching a high of $17.57.

It is expected that this strategy will facilitate Avis Budget in streamlining its financial, administrative and customer services in the Europe, Middle East and Africa (EMEA) operational region. Moreover, the company anticipates the expansion to result in significant cost savings.

The expansion will increase the total number of employees to approximately 550 at BSC and will include personnel with communication skills in different languages like Dutch, English, French, German, Italian and Spanish. Avis Budget had set up this facility in January 2004, and became the first international company to have a regional service center in Budapest.

The company has always tried to take advantage of other inbound revenue opportunities by focusing on new ideas and investments in its brands and technology upgradation. Since the acquisition of Avis Europe in October 2011, the company remains on track with its integration plans and expects its 2012 results to gain annual synergies of over $35 million.

Lately, Avis Budget has launched its own sales force in the European region to own and leverage the local opportunities and customers to drive inbound business.

Our Recommendation

We believe that Avis Budget follows a core global strategy of partnering with leading travel brands to expand its customer reach while creating additional demand. The acquisition of Avis Europe was one of the major steps taken by the company to enhance its operational foothold in global markets.

Moreover, the company’s partnership with leading German automobile club Allgemeiner Deutscher Automobil-Club testifies to its commitment to its global strategic initiatives, which are based on the value of its brands and its ability to provide synergies to partners, benefitting their brands and businesses.

Further, we remain impressed with Avis Budget’s sustained focus on productivity and cost containment initiatives, which in our view, would help the company achieve its goal of higher operating margins.

However, significant exposure to foreign currency translations and heavy dependence on third-party distribution channels remain the causes of concern. Moreover, due to intense competition from other established players such as Hertz Global Holdings Inc. (HTZ) and Dollar Thrifty Automotive Group Inc. (DTG), the company may find it challenging to maintain the same level of operating performance.

Currently, Avis Budget carries a Zacks #3 Rank signifying a short-term Hold rating. Moreover, we maintain a long-term Neutral recommendation on the stock.

Avis Budget Group is the leading vehicle rental company in North America, Australia, New Zealand and EMEA. A network of more than 10,000 rental locations and 350,000 vehicles gives the company a well-established position in a highly competitive vehicle rental industry.

 
AVIS BUDGET GRP (CAR): Free Stock Analysis Report
 
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