What happened

Rental car giant Avis Budget Group (CAR 7.04%) is trouncing the market so far this week by rising 59% through Thursday trading.

Investors were pleased with the company's recent operating update that showed a return to record earnings as the rental car industry recovered from the pandemic slump.

An employee hands keys over to a customer who is renting a car.

Image source: Getty Images.

So what

Sales were up 96% in the third quarter (which ends in late September) as compared to unusually weak results a year ago due to the pandemic. Revenue was also 9% higher compared to more-normal times two years ago.

Avis had more good news for investors in the form of over $1 billion of adjusted earnings and $674 million of net income thanks, in part, to soaring rates for rental cars. The company logged over $75 in average per day rentals, in fact, compared to $53 in the same period a year earlier .

And the company announced a much-improved financial position after paying down debt and booking over $2.5 billion in operating cash flow over the past nine months. "We are seeing the benefits of initiatives we began during the early days of the pandemic," CEO Joe Ferraro said in a press release, "and look to build on this positive momentum as the travel environment continues to normalize."

Now what

Avis isn't struggling to secure inventory during the industry's semiconductor shortage, which is great news for growth, assuming demand trends remain strong. Meanwhile, investors are benefiting from increasing direct cash returns, mainly from stock buybacks. These repurchases have reduced Avis' outstanding share count by 16% just this year.

That move should help per-share earnings rise substantially over time, and the company was still able to reduce its debt burden. Those successes show the value of having a leadership position in an industry that's seeing a historic recovery here in late 2021.