Hertz Global Holdings Inc. lost half its market value after the rental-car company reported a third-quarter profit that badly trailed analysts’ estimates and cut its annual earnings forecast, blaming a decline in revenue and a drop in the values of its cars.

Hertz shares fell as much as 52 per cent, wiping out $1.5 billion (U.S.) in equity value, and its bonds were among the worst performers Tuesday. Quarterly adjusted profit of $1.58 a share was far below the average estimate of $2.73 in a Bloomberg survey, and Hertz said full-year earnings may be less than a fifth of what it projected in August.

The rental company, whose largest investor is billionaire Carl Icahn, failed to adequately price the cars in its fleet and depreciate them over time before selling them in used-car auctions. The issue, which is far more pronounced at Hertz than smaller rival Avis Budget Group Inc., is the latest challenge chief executive officer John Tague, a former United Airlines executive, has faced since joining in late 2014 in the wake of Icahn’s involvement.

“If they had a problem with the value of their cars, that means their depreciation was not adequate,” said Maryann Keller, an independent consultant in Stamford, Connecticut, who once sat on the board of Dollar Thrifty Inc., which merged with Hertz in 2013. “Depreciation is the highest cost in the rental industry. You have to know how much you will be able to recover on these vehicles.”

No investor was hit harder than Icahn, who owns almost 16 per cent of the shares, according to the latest filings. He had disclosed an 8.5 per cent stake in August 2014, when the stock traded for more than $100 a share.

Hertz shares tumbled 40 per cent, the most since its 2006 public offering, to $21.55 at 11:50 a.m. in New York after slipping as low as $18.54.

Shares of rival Avis fell about 9 per cent after earlier dropping 18 per cent.

There are more questions than answers with Hertz and it will be “extraordinarily difficult” for investors to have conviction in continued progress on turnaround story given “these latest disappointing and surprising developments,” Deutsche Bank analyst Chris Woronka said in a research report. He cut his rating to hold from buy.

Hertz said there could be added costs as it continues to match up depreciation rates in its financial statements with the value of the cars in its fleet.The company reduced its full-year earnings outlook to a range of 51 cents to 88 cents a share, after saying in August that it expected $2.75 to $3.50.

The disappointing results contrast with the situation at Avis, which through Monday’s close had risen 7.5 per cent this year while Hertz had dropped 37 per cent. Avis beat estimates for sales and profit in quarterly earnings reported after the market close on Nov. 2, and its shares surged 13 per cent the next day.

Avis is gradually closing a revenue gap with its larger rival, with sales rising 3.1 per cent compared with the decline at Hertz. It also did a better job controlling costs in the period, with a 2 per cent gain compared with the 5 per cent increase at Hertz.

Tague took over in 2014 after former CEO Mark Frissora stepped down in the wake of accounting problems at the company and shortly after Icahn showed up with a large stake. Tague was chosen over rental industry veteran Scott Thompson, who ran Dollar Thrifty before it was sold to Hertz.

Hertz said depreciation per unit per month increased 14 per cent in the quarter, due to lower than expected resale values, primarily in compact and mid-sized vehicles. The company also said it had a higher percentage of non-program vehicles, which are called “risk cars” because the automakers don’t buy them back after a fixed period of time. That means Hertz has to sell the cars in the used market or at auctions and manage the risk of value.

The cost associated with depreciation in its U.S. business was $462 million in the quarter, some 16 per cent higher than it was a year ago.

The value of compact and mid-sized cars have been under pressure as American buyers favour trucks and sport utility vehicles. In October alone, the wholesale prices of used compact cars fell 3.4 per cent, according to Manheim, the nation’s largest used vehicle auction house. Auction pricing on risk cars of all kinds fell 3 per cent in October from September and 2 per cent from a year ago, according to Manheim data.

Hertz had other issues, too. Its U.S. rental car revenue fell 2 per cent in the quarter. The company also had a utilization rate for its cars of 82 per cent. Goldman Sachs analyst David Tamberrino had predicted 86 per cent. Keller said 85 per cent is a pretty healthy rate.

The company got weaker pricing on its U.S. rental business, where revenues decreased 2 per cent year-over-year thanks to a 3 per cent decline in rental rates per day. Rental volumes were also at the low end of expectations, Tague said.