By Janet H. Cho

The abrupt cancellation of Verra Mobility's contract with Avis Budget Group, starting in September, is a major loss to Verra's toll management business and could affect its relationship with other major customers, analysts said.

The smart mobility tech company generates revenue from the tolls tracked by in-vehicle transponders and the fees rental car drivers pay to manage their tolls, which Verra Mobility then shares with the rental car companies.

But Verra surprised the market on Tuesday when it announced that Avis Budget was terminating its contract. Verra said it was "surprised and disappointed" by the notice, given its longstanding partnership with Avis Budget Group. Verra also lowered the full-year 2026 revenue and earnings guidance it issued earlier this month, and said it would cut costs and reallocate some resources to other customers.

"We remain confident in the strength of our platform, our ability to continue innovating, and our capacity to meet customers' evolving needs while mitigating the impact of this development," Verra Mobility President and CEO David Roberts said on Tuesday.

Avis represented 13.5%, or about $132 million, of Verra's revenue last year, according to Keith Housum, managing director and equity research analyst at Northcoast Research Partners in Cleveland. "The loss is significant, and frankly, comes as a significant surprise," he said.

Northcoast Research downgraded Verra Mobility's stock to Neutral as it reassesses its commercial services business. Analysts from JPMorgan, William Blair, Robert W. Baird, and Deutsche Bank also downgraded the stock on Wednesday.

UBS Global Research analysts led by Christopher Zhang downgraded the stock to Neutral from Buy, and lowered a 12-month price target to $4, from $23.

"We believe Verra Mobility's toll management solutions remain compelling" for its rental car company customers, UBS wrote, but lowered its 2027 to 2028 estimates by 27% to 36% to reflect the Avis Budget contract loss and uncertainty about Verra's upcoming contract renewals with Hertz Global Holdings and Enterprise Rent a Car in 2027.

"While the potential outcome could remain an overhang on the stock in the medium term, we view the risk/reward as relatively balanced following the selloff," UBS analysts wrote.

Verra stock rose 7% on Thursday, to around $4.13 a share, after falling more than 70% on Wednesday.

Zhang wrote that it is unclear if Avis Budget is moving forward with a competitor or will attempt to develop its own in-house solution, which Verra Mobility believes would be a very difficult task. UBS said that Verra Mobility's toll management solutions accounted for about 39% of its 2025 revenue, with higher margins than its commercial services segment margin.

Avis Budget Group has not responded to Barron's requests for comment.

Housum said Verra Mobility spent significant time building relationships with more than 50 state tolling agencies and its 20-year "win-win relationship enjoyed by both the rental car agencies and Verra Mobility."

"The fact that they are moving away from Verra Mobility after such a long and mutually beneficial relationship could cause other major customers, including Hertz Global Holdings, Inc. and Enterprise Rent a Car to reevaluate their relationship as well," Housum wrote. They might also decide to walk away, or to renegotiate their contracts with Verra with better terms, he said.

Neither Verra Mobility, Hertz Global Holdings, nor Enterprise Rent a Car could immediately be reached.

Housum also wrote that the loss of the Avis contract is "just one of several negative surprises investors have dealt with over the past year, " including lower-than-expected near-term profitability with the New York City contract, the loss of speed cameras in Ottawa, Canada, and customer churn in its fleet management business. Now that its toll management business is at greater risk, it expects that new investors will be more wary of Verra Mobility shares in the near future.

Verra Mobility's management said it will need several weeks to fully evaluate the operational and financial implications of the contract termination and identify appropriate cost reductions as it looks beyond 2026, even as it lowered 2026 guidance by $35 million less on revenue, to between $985 million and $995 million, he said.

The company also lowered its expected adjusted earnings before interest, taxes, and depreciation by $20 million and $25 million, to between $380 million and $385 million.

Housum said Northcoast Research has updated its own estimates in light of the Avis loss, to full-year revenue of $991 million, adjusted Ebitda of $384 million, and adjusted earnings of $1.23 a share.

Northcoast Research has lowered its full-year 2027 estimates to revenue of $975 million (down 1.5%), adjusted Ebitda of $263 million (27.2% adjusted Ebitda margins), and earnings of $1.15 a share.

Write to Janet H. Cho at janet.cho@dowjones.com

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May 28, 2026 17:33 ET (21:33 GMT)

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