Avis’ Stock (NASDAQ:CAR) Outperforming Into Earnings – What To Expect

Avis Budget Group Inc. (NASDAQ: CAR) has been a Wall Street darling for much of 2025. Its stock has almost doubled year-to-date, fueled by a resurgence in travel demand and the company's aggressive cost-cutting measures. As of today, CAR is trading at $157, a 5.12% increase in the last five days, reflecting continued market optimism ahead of its upcoming earnings release. But with earnings on the horizon, the question on everyone's mind is: Can Avis sustain this momentum?

The market's bullish sentiment is largely pinned on strong earnings expectations. The company is slated to release its earnings report tomorrow. Analysts are projecting an earnings per share (EPS) of $7.90 for the current quarter, a substantial 18.80% increase from the $6.65 EPS reported in the same quarter last year. These robust projections reflect the market's belief in Avis' ability to capitalize on the current travel boom.

CEO Joe Ferraro has emphasized a strategy of “fleet discipline,” which involves actively managing the size of the rental fleet to optimize utilization rates. In Q3 2024, the average rental fleet size was reduced by 2.5% to 735,841 vehicles, resulting in an improved utilization rate of 72.1%. This laser focus on efficiency is aimed at boosting profitability.

Avis is also investing in innovative ventures. The launch of ‘Avis First,' a premium car rental service, targets a higher-end clientele, while the partnership with Waymo to introduce autonomous ride-hailing in Dallas signals a forward-thinking approach to transportation solutions. These initiatives represent Avis' efforts to adapt to changing consumer preferences and technological advancements.

While the prevailing narrative surrounding Avis is largely positive, it's prudent to consider potential headwinds. Have the markets fully priced in the cyclical nature of the car rental industry? A global economic slowdown could significantly impact travel demand, and by extension, Avis' revenues.

Furthermore, the company's debt load remains a concern. While Avis has made strides in reducing its debt, a significant portion still remains, making it vulnerable to rising interest rates. Finally, the competition is intensifying, with new players and alternative transportation options vying for market share. The current valuation may be pricing in near-perfect execution and continued favorable market conditions, which may be overly optimistic.

Despite the recent earnings miss, Avis Budget Group remains optimistic about its financial outlook, targeting an Adjusted EBITDA of $900 million to $1 billion for the full year. The company's strategic focus on fleet optimization and technological advancements positions it to navigate the competitive landscape of the car rental industry.

Avis Budget Group has undoubtedly had a remarkable run in 2025. However, the company now faces the challenge of living up to the market's heightened expectations.