What happened

Shares of Avis Budget Group (NASDAQ:CAR), a vehicle rental company, jumped over 13% higher Tuesday before giving up some gains in the late afternoon as many transportation and "reopening" stocks rose thanks to vaccine and stimulus hopes.

So what

At the time of this writing the Dow Jones Transportation Average was fighting to continue its 10-day streak moving higher and is on the cusp of being positive for the year. The broader transportation rise also pushed Avis higher Tuesday and almost back to even for the year.

^DJT Chart

^DJT data by YCharts

It's been a wild ride for Avis investors after the company watched its rental business grind to a near standstill that sent revenue plunging and forced rival Hertz into bankruptcy protection. Avis recently added to its liquidity by announcing $350 in million 5.75% senior notes due 2027 in a private offering and will use some of the net proceeds to redeem outstanding 5.5% senior notes due 2023, as well as for general corporate purposes.

Car rental sign at airport

Image source: Getty Images.

Now what

The main takeaway for Avis investors since COVID-19 crippled the transportation industry is that management has done everything it can to better position the company to survive the downturn and to capitalize on growing market share from Hertz's likely downsizing and restructuring. Avis has removed more than $2.5 billion in annualized costs compared to the original $400 million estimated in March, and has cut its fleet size by roughly 26% to better align with demand going forward. Thanks to its focus on cost-cutting and fleet reduction, management believes Avis will be cash-flow positive for the remainder of 2020. Despite the recent rally in transportation stocks, investors would be wise to temper expectations of a rapid recovery.