Shares of car rental specialist Avis Budget Group (NASDAQ:CAR) jumped on Thursday following a strong third-quarter report. The company beat analyst estimates on all fronts, and disappointing guidance for the full year didn't seem to faze investors. At noon EDT, the stock was up about 12.5%.
Avis reported third-quarter revenue of $2.66 billion, up 3% year over year and $10 million higher than the average analyst estimate. The main drivers behind the revenue increase were a 2% jump in pricing in the Americas and a 4% increase in international rental days. Americas revenue rose 3% year over year, while international revenue rose 4%.
Non-GAAP EPS came in at $2.47, up from $1.98 during the third quarter of 2015 and $0.13 above analyst expectations. On a GAAP basis, EPS was $2.28, up from $1.77 in the prior-year period. Increased rental volumes and increased pricing in the Americas drove earnings higher, while higher per-unit fleet costs had a negative impact.
Avis expects pricing strength in the Americas to continue, but for demand to soften in both the Americas and Europe. Due to this outlook, the company announced that it expected its 2016 non-GAAP EPS to be at the low end of its prior guidance range. Non-GAAP EPS of $2.93 is now expected for the full year, just a few cents higher than the low end of its guidance range of $2.90 to $3.30.
A strong third quarter overshadowed this disappointing guidance in the minds of investors. The stock's valuation may be a factor -- even after Thursday's jump, the stock trades for about 12.5 times the company's new earnings guidance. The market may have been expecting worse, leading investors to bid up the stock despite soft guidance.