What happened

Shares of Avis Budget Group (NASDAQ:CAR), a vehicle rental company, jumped more than 11% higher early Wednesday, despite dismal operating results during COVID-19, as the company's actions to reduce its fleet size and costs could set the stage for positive adjusted EBITDA for the remainder of 2020.

So what

Avis' second quarter is really a mixed bag that contains equal parts dismal and impressive results. COVID-19 obviously shattered the company's business as travel and transportation slowed to a near standstill during the second quarter. Revenue dropped 67.5% to $760 million compared to the prior year and adjusted earnings per share checked in with a $5.60 loss. While those figures are abysmal, the top and bottom lines actually beat Wall Street estimates.

Rental desk sign at airport

Image source: Getty Images.

What's also important for investors to recognize is the company's ability to adjust and cut costs. Management is targeting to save over $2.5 billion on an annualized basis and has sequentially improved its adjusted EBITDA results every single month since COVID-19 hit, actually reaching positive adjusted EBITDA in the Americas segment during June. Management originally estimated its second-quarter cash burn would be a significant $900 million chunk of its $1.5 billion liquidity, but the actual cash burn checked in at $580 million thanks to the company downsizing its fleet and other cost removal initiatives.

Now what

Investors have reason to be optimistic despite the dismal financial figures from Avis' second quarter. Management deserves a lot of credit for its ability to raise liquidity while significantly reducing cash burn. Let's not forget that Avis was able to take steps to stabilize its business at a time when Hertz Global Holdings (NYSE:HTZ) was forced to file for bankruptcy protection. While what happens with Hertz is yet to be determined, it's generally believed that Avis will stand to benefit from the development once travel and transportation returns to some realm of normalcy.