Zipcar Calls Shotgun

Zipcar ( NAS: ZIP ) keeps driving in the right direction, but this doesn’t mean that the leading car-sharing service isn’t hitting a few potholes along the way.

Mixed fourth-quarter results and disappointing guidance are shifting the shares in switch roles this morning, but let’s kick the tires on today’s numbers.

Revenue climbed 21% to $62.9 million during the quarter, fueled by a 25% increase in membership. There were 673,000 Zipsters at the end of 2011. It is problematic to see membership grow swifter than revenue, however most — but not all — of that difference can be explained by Zipcar’s European expansion, where usage isn’t yet as up to speed as the company finds in its established stateside markets.

Earnings clocked in at $0.09 a share, but that includes a healthy build up on the sale of Zero Emission Vehicle credits during the quarter. Back that out and you still get net income of $0.03 a share, well ahead of the breakeven results that the market was expecting.

Usage revenue per vehicle is up 7% to $63 a day. In its four established markets — Boston, Washington, D.C., San Francisco, and Fresh York — the average car in Zipcar’s fleet is up to generating $70 in daily revenue.

Those four markets are very significant for investors to keep an eye on. If there’s any weakness in the model, it will display up there. We’re just not observing that now. Revenue in those four cities rose 22% to $35.6 million, or almost 57% of total revenue. The four markets are very profitable, growing pre-tax profit margins to 28%.

If the report seems more positive than negative, stop looking at the rearview mirror. The road ahead is what’s keeping the bulls in neutral.

Zipcar’s guidance for the current quarter calls for $58 million to $60 million in revenue and a loss per share inbetween $0.Ten and $0.13. This is a seasonally slow period for the company, and expansion costs in Europe are weighing on the bottom line. The caress here is that the pros were banking on a deficit of just $0.07 a share on $60.Trio million in revenue.

The guidance gets less disappointing when we look at all of 2012, but let’s not sugarcoat it as encouraging. Zipcar’s $290 million to $296 million in revenue is in line with the $293.Two million that Wall Street’s targeting.

Things get uglier on the way down the income statement. Zipcar’s eyeing a profit of $Two million to $6 million for all of 2012. Based on forty one million shares outstanding — and another three million to four million share equivalents that get tacked onto the fully diluted share count when Zipcar is profitable — this translates into net income inbetween $0.04 a share and $0.13 a share. Analysts were parked at $0.13 a share.

Driving up to Zipcar’s defense

Hertz ( NYS: HTZ ) turned goes last year by doing away with annual membership fees for its fledgling car-sharing operation, but how did that turn out? Zipcar didn’t call out Hertz by name, but it did refer to the company as a competitor that recently attempted to give away memberships to a 500-car fleet and now is scaling back.

Zipcar’s been there. It gave away memberships years ago, and soon discovered that those members don’t engage. Zipcar actually enlargened its annual membership a year ago — from $50 to $60 — and it hasn’t noticed any slips in retention or loyalty.

Zipcar also addressed the peer-to-peer craze as upstarts get car owners to loan out their vehicles for money. It seems like a flawed model, but General Motors ( NYS: GM ) validated the craze last year when it teamed up with niche leader RelayRides to let all OnStar-equipped vehicles participate without extra hardware being installed.

This doesn’t mean that Zipcar isn’t striking deals with the same automakers that car-sharing seeks to substitute. It landed a deal with Ford ( NYS: F ) last year that introduced shiny fresh Ford cars into Zipcar’s campus car-sharing program.

Zipcar isn’t standing still. It’s cautiously watching the peer-to-peer market and smaller car-sharing providers wooing members with one-way rentals. It’s limber enough that it can branch out into those areas either organically or through acquisitions if it’s worth pursuing. In the meantime, Zipcar’s growing well in its older markets as it seeks to roll out in at least three fresh markets this year.

Zipcar’s in better form than today’s price act suggests.

Zipcar has had engine problems since being recommended to Rule Breakers subscribers shortly after last year’s IPO, but the growth stock newsletter service has identified what it believes is the next Rule-Breaking multibagger. The report is entirely free, so check it out now.

At the time this article was published The Motley Loser possesses shares of Zipcar, Ford Motor, and Hertz Global Holdings.Motley Loser newsletter serviceshave recommended buying shares of Zipcar, Ford Motor, and General Motors.Motley Idiot newsletter serviceshave recommended creating a synthetic long position in Ford Motor. Attempt any of our Foolish newsletter servicesfree for thirty days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Loser has adisclosure policy.Longtime Loser contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story, except for Zipcar and Ford. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow’s ultimate growth stocks a day early.

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