Avis Budget Group Inc. recently announced it would buy back an additional $50 million of its common stock and also chose to not lower its 2007 guidance to the extent analysts thought it might.

Christopher Agnew of Goldman Sachs said the company update is good news, because the market probably expected Avis' fourth-quarter profit to miss estimates, its earnings to weaken in 2008 and for it to face refinancing problems in 2008.

The stock has a forward PE of 8.

Avis Budget (CAR) was upgraded to Equal-weight, Morgan Stanley said. Stock is down 65% from its 2007 peak, and cost-cutting efforts should benefit margins in the long term. $12 price target.

Avis, Avis Budget Group, Inc.

spinoff/turnaround

Avis Auto Rental is on of the best run and managed companies

anticipated growth and high dividend yield

Avis/Budget is basically a sound business that took an undeserved beating. It was a bargain.

Schafer is a fan of spinoffs. Of the three companies that Cendant split into last year, he prefers Avis Budget. He believes that last year the company was hit with a perfect storm of problems, but that it will bounce back.

"Together these factors led to pretax margins of 2.9%. Management has laid out a plan to return to 8% margins before taxes. With most competing companies like Hertz [HTZ] now public, pricing discipline will be more important. There are signs of better pricing in the commercial markets, and the company's off-airport business will continue to grow by 20%. With normalized operating margins, achievable this year, Avis Budget could generate free cash flow in excess of $3.50 a share. It could be an attractive acquisition candidate, though as long-term holders we would prefer the fundamentals to play out and get the stock into the 30s before a private-equity buyer pounces. It is now 22.25."

Part of former company portfolio familiarity with business

Was under valued

Rental Car industry not good

Auto Leasing

Spin-off from Cendant tragedy