Shares of Avis Budget Group (NASDAQ: CAR) soared Thursday after the car rental company posted better-than-expected results in its first-quarter earnings report, even though the business is still facing challenges.
The stock finished up 20.1%.
Image source: Getty Images.
Avis shifts into high gear
Revenue in the quarter was flat at $2.6 billion, which topped estimates at $2.41 billion.
The company said rental days were up 5% from the first quarter of 2023, a sign of solid demand, though it also shows that prices came down by a similar percentage.
The first quarter is the seasonally slowest in the car rental industry, but Avis Budget still posted an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) profit of $12 million, though that was down sharply from $535 million in the quarter a year ago.
Profits were impacted by the company's decision to reduce its fleet size and dispose of a record number of vehicles. That led to the company reporting a loss per share of $3.21, which was worse than the consensus at $2.70, but investors seemed willing to overlook that, given the better-than-expected top-line performance.
CEO Joe Ferraro said, "The strong travel demand from last year continued into the first quarter with record volume in the Americas as well as improved pricing trends as the quarter progressed."
What's next for Avis Budget
The rental car company didn't give guidance in the press release, but it seems to have an advantage over rival Hertz Global, which is trying to unwind its big bet on electric vehicles.
Investors also liked the company's improved liquidity position as it has no meaningful maturities until 2027 after paying a euro note in April.
If demand remains strong heading into the peak season, Avis stock should keep rising. The stock looks cheap at a forward P/E of less than 9.
Should you invest $1,000 in Avis Budget Group right now?
Before you buy stock in Avis Budget Group, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Avis Budget Group wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.
*Stock Advisor returns as of April 30, 2024
Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
