Q3 earnings season for the two big names in U.S. car rental, Avis and Hertz, is set to kick off on Monday when Avis reports after the market close. In a new report, MKM Partners analyst Jim Strugger explained why he believes things could be on the upswing for the rental car business, but buying common stock may not be the best way to play the turnaround.

Industry Stabilizing

Both Avis and Hertz’s stocks have significantly lagged the S&P 500 this year, falling more than 20 percent year-to-date. According to Strugger, the weakness has been the result of market concerns over pricing power and continued uncertainty over Hertz’s financial situation. Now that Hertz is current on its financial reporting and MKM is starting to see signs that the rental car business is stabilizing, Strugger feels that this could be a good time to play a 2016 rental car recovery.

Avis

MKM analyst Chris Agnew believes…

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