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CarMax EPS Growth Ramps Up; Shares Soar 9% To New High

CarMax (KMX) reported better-than-expected third-quarter earnings Thursday, sending shares to record highs.

The used-car dealership chain said Q3 EPS rose 14% to 41 cents, beating analyst views by 2 cents. Revenue jumped 15% to $2.6 billion, beating estimates of $2.47 billion. It was the second straight quarter of accelerating growth for EPS and sales.

Shares shot up 9% to 37.81 in heavy volume. Rural car dealership operator Lithia Motors (LAD) rose 2%, also to a record high.

CarMax's retail used-car sales rose 17%. Sales at its wholesale business climbed 10%, the first gain in three quarters. The wholesale business sells to licensed dealers cars that don't meet CarMax's retail standards and is much smaller than its retail segment.

Same-store sales of used vehicles increased 12% due to credit offers from third-party finance providers, increased inventory selection and improved customer sentiment.

"It's really hard to tell if behavior is shifting back to what we saw pre-recession. I'd say not yet," CEO Thomas Folliard said on the post-earnings conference call.

Over one-fourth of CarMax's sales in the latest quarter were of autos at least five years old.

U.S. auto sales rose 1.4% in November vs. the prior month after falling 1.9% in October, according to the Commerce Department.

CarMax's gross profit widened 14% to $345.2 million from $303.2 million. Used vehicle gross profit rose 15% to $227.0 million. Wholesale gross profit rose 11% to $73.6 million.

During the latest quarter, CarMax launched an app for the Apple (AAPL) iPhone. Traffic from the app accounted for nearly 5% of total traffic to CarMax's website.