By Nora Naughton 

Avis Budget Group's stock rose sharply Tuesday, following strong quarterly results and a bullish outlook on the recovering rental-car market.

Avis also said it was executing on plans to add more electric vehicles to its global rental fleet and will announce those plans when they are ready.

In midday trading, the rental-car firm's stock was up 86% to $319 a share, driven in part by third quarter results that beat analysts' expectations and included a record adjusted pretax profit of $1 billion. Earlier in the day, shares traded as high as $545 a share.

Net income was $674 million in the July-to-September period, up from $45 million in the third-quarter last year, and revenue was about $3 billion, a 96% increase over the prior-year quarter.

Avis Chief Executive Officer Joe Ferraro said on an earnings call that the company's quarterly adjusted pretax profit hit a goal first set in 2014. He said the company, which put in cost-cutting measures and other efficiencies in recent years, is starting to see those efforts produce results, as the rental-car market is coming back in a robust way.

"To finally deliver on that promise in a single quarter after the worst crisis our company has ever faced is honestly a bit cathartic," Mr. Ferraro said.

Like other rental-car firms, Avis is regaining its footing after bookings collapsed during the onset of the pandemic, when travel restrictions were put in place in response to the Covid-19 virus.

Since then, reservations for rental-cars have rebounded, due in part to more Americans renting cars for road trips and other travel.

Avis's CEO said demand for travel in the U.S. showed positive momentum throughout the spring and continued to pick up in the third quarter. Still, the availability of new vehicles remains tight, putting constraints on fleets, as rental-car demand is outpacing supply, Mr. Ferraro added.

"We are cautiously optimistic that the worst is behind us," he said.

Analysts say that the company's adjusted pretax margins of 40% in the Americas stood out given the capital-intensive nature of the rental-car business, which involves model purchases, as well as moving, maintaining and reselling vehicles.

Morgan Stanley analysts likened Avis's operating profitability to that of some mature software companies, saying that management is capitalizing on the strong rental environment now.

The strong results follow news last week that rival Hertz Global Holdings Inc. placed a 100,000-vehicle order from Tesla Inc. to help restock its rental-car fleet. The order sent Tesla's stock soaring at the time and pushed up shares of Hertz, which has been traded over the counter since it was delisted in 2020. Hertz emerged from bankruptcy over the summer.

Tesla Chief Executive Elon Musk said late Monday that the electric-vehicle maker hasn't yet signed a deal with Hertz; a Hertz spokeswoman Tuesday stood by the company's earlier announcement and said deliveries of the Teslas have already started.

Without naming Hertz specifically, Avis Budget Group's Chief Financial Officer Brian Choi said the move by one of its competitors to buy electric vehicles was a positive for the rental-car industry overall.

"It pushes [the] pace, and draws attention to what needs to be done to absorb electric vehicles at scale," Mr. Choi said. He added that Avis is executing on its electric-car buying strategy and will disclose more information when plans are completed.

Avis has said it plans to reduce the company's greenhouse-gas emissions by 30% over the next decade, and on Tuesday, Mr. Ferraro said adding more hybrid and battery-electric models to its global fleet will play a big part in reaching that target.

Write to Nora Naughton at Nora.Naughton@wsj.com