What happened

Shares of Hertz Global Holdings (NYSE:HTZ) traded up more than 12% on Tuesday morning after the rental car giant reported third-quarter earnings that came in slightly better than expectations. Investors were bracing for the worst after archrival Avis Budget Group missed estimates and provided soft guidance, but Hertz delivered.

So what

After markets closed Monday, Hertz reported third-quarter adjusted earnings of $1.60 per share on revenue of $2.8 billion, beating analyst estimates for $1.47 per share but falling about $40 million short on revenue. Adjusted EBITDA for the quarter was $269 million, up 29% year over year, and the adjusted EBITDA margin was up 300 basis points to 14%.

A car waiting in the driveway.

Image source: Getty Images.

Shares were flat on the year coming into earnings season but down 50% over the last three years, as the company deals with new competitive threats from rideshare services, higher vehicle prices, and inconsistent operations. The company launched a turnaround plan in 2017 to improve fleet management and capacity and to operate more efficiently.

CEO Kathryn Marinello said the work is beginning to pay off: "Our strong third-quarter results continue to reflect the successful execution of our strategies, operational efficiencies, and early returns on foundational and growth investments. By leveraging core strengths and looking at our business with an entrepreneurial mindset, we're not only improving the customer experience, we're finding new ways to capture incremental growth in adjacent markets and create incremental value through innovation."

Now what

Hertz had an impressive quarter, but investors should be mindful that at least some of Tuesday's jump is likely short covering by those who were enticed to get in after seeing Avis' results.

The business is certainly performing at a higher level than it was only a few years ago, but still faces all of those same competitive threats that worried investors back then. And the rental industry could be hurt if the U.S., as many fear, falls into a recession. I'd rather watch this one from the sidelines than jump in, even after the strong third quarter.