Is Avis Budget Group (CAR) Attractive After Earnings?

The recent earnings report from Avis Budget Group (CAR) has sparked a nuanced debate among investors. While the company's third-quarter 2025 results showcased resilience-posting a net income of $359 million ($10.11 per share) and revenue of $3.52 billion-these figures must be weighed against significant operational headwinds. With revenue growth marking the first increase in eight quarters and adjusted EBITDA exceeding estimates by 4.4%, the stock's appeal hinges on its ability to balance short-term challenges with long-term margin expansion potential, according to the Avis Q3 2025 report.

Near-Term Headwinds: Fleet Recalls and Pricing Pressures

Avis faces immediate hurdles, including a fleet-wide recall impacting $90–$100 million in annual costs, with $60 million already absorbed in Q3 2025, according to the earnings call highlights. These expenses, coupled with a 3% decline in revenue per day (RPD) for the Americas, highlight vulnerabilities in its core markets. The drop in RPD is attributed to softer leisure pricing and industry-wide competition, which have compressed margins despite disciplined cost controls, the call notes.

However, the company's international segment offers a counterbalance, with a 5% RPD increase driven by higher-margin leisure and inbound business. This divergence underscores Avis's geographic diversification as a strategic asset, though it also raises questions about the sustainability of its pricing models in saturated markets.

Long-Term Margin Expansion: Customer Experience as a Differentiator

Avis's emphasis on customer experience, particularly through its "Avis First" premium service, has proven to be a bright spot. The program, which boasts a 4.9-star customer rating, reflects the company's pivot toward value-added services to build brand equity, as discussed on the earnings call. CEO Brian Choi's stated focus on return on invested capital over market share further signals a strategic shift toward profitability, with modest RPD improvements expected in Q4 2025, according to management commentary.

Adjusted EBITDA of $559 million-$24 million above projections-demonstrates operational efficiency amid these challenges, the IndexBox report notes. Analysts observe that Avis's ability to maintain margins while investing in customer loyalty programs could position it for long-term gains, particularly as the recall costs taper off in 2026.

Balancing the Equation: A Cautious Bull Case

For investors, the key question is whether Avis can sustain its recent momentum. The company's disciplined approach to cost management and its focus on high-margin services suggest a path to margin expansion, but the near-term financial drag from recalls and pricing pressures cannot be ignored. Avis's stock may appeal to those who believe its customer-centric strategy will outpace industry headwinds, particularly as international growth and operational improvements gain traction.

However, the path to long-term success remains contingent on executing its premium service initiatives and navigating the fleet recall costs without eroding investor confidence. For now, CAR presents a mixed picture: a resilient business with clear growth levers, but one that requires patience to fully realize its potential.