What happened

Shares of rental-car giant Hertz Global Holdings (OTC:HTZG.Q) easily outpaced the overall market in November, gaining 36.1%, compared with just a 1.8% rise in the S&P 500, according to data from S&P Global Market Intelligence.

So what

It would be easy to attribute Hertz's share gains to takeover rumors that surfaced late in the month, but Hertz's strength predated talk that German rental giant Sixt was interested in using M&A to expand its U.S. presence. Sixt, for its part, called the reports "baseless" on Nov. 29, putting pressure on Hertz shares that up to that point had been up nearly 50% in November.

Man accepts car key from inside the vehicle

Image source: Getty Images.

Hertz shares were in the fast lane thanks to a stronger-than-expected third-quarter earnings report. The company on Nov. 8 reported adjusted earnings per share of $2.14 on sales of $2.8 billion, beating estimates of $1.71 in earnings on $2.68 billion in revenue. It was the company's first significant quarterly EBITDA beat in several years and led to a 20% one-day rally in the shares.

Company CEO Kathryn Marinello, on a call with analysts that followed the results, said Hertz's turnaround plan, launched in early 2017, was making strides in controlling fleet costs and better managing supply and demand. Hertz also hopes to have 85 used car sales locations nationwide by year's end, which should help it to more efficiently monetize vehicles coming off the rental lots.

"When we optimally execute on these strategies, we win customers, support discipline in the marketplace, sharpen our processes, and disrupt the status quo," Marinello said.

Now what

Hertz has given back more than 5% of its November gain in the early days of December. Perhaps investors have been disappointed that no further news has emerged about potential deal interest. Or it could be a realization that for all the progress Hertz has made, the company still faces significant challenges.

^SPX Chart

S&P and Hertz data by YCharts

Even after a good November, Hertz trails the S&P by 20% year to date and has underperformed by nearly 100 points over the past three years. The company carries more than $17 billion in total debt and faces the potential for a decline in used car residual values in the quarters to come. Longer term, it is still unclear how much still-young concepts such as ride-hailing services will eat into the business model for Hertz and other rental companies.

Hertz shares had a great November. It will be hard for the company to sustain those gains in the months to come.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.