Insights

Why Avis Budget Is Stepping on the Gas Today

What happened

Shares of Avis Budget Group (NASDAQ: CAR) are jumping 8.8% at 11:41 a.m. ET on Thursday after rival Hertz Global (NASDAQ: HTZ) reported second-quarter results that beat Wall Street expectations as travel demand surged in the quarter. 

Hertz stock, which was soaring over 16% higher on the news, showed a much bigger-than-expected profit, which is helping to lift Avis shares too. Yet it also marks the second straight day Avis shares are enjoying an increase, as the stock was 5.5% higher yesterday.

As that followed a 7% drop on Tuesday, Avis Budget is trading 8.8% higher for the week.

So what

Despite a run-up in energy costs that saw the average price of gasoline rise to a record $5 per gallon nationally this year, consumers are still hitting the road. But because there remain severe car shortages that are causing vehicle prices for both new and used cars to soar, it helps car rental outfits like Hertz and Avis to get better prices as they rotate their fleet.

Hertz reported its profits were bolstered by higher used car prices, which also served to lower its depreciation costs, which tumbled 22% from the year-ago period.

Now what

Avis Budget Group is expected to report its own earnings on Monday, Aug. 1, and Wall Street is expecting profits of $12.39 per share, or more than double what it recorded a year ago. With Hertz results stronger than anticipated, Avis may very well beat forecasts too.

Rich Duprey 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.

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