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CarMax (KMX) Earnings Surpass Estimates in Q1, Rise Y/Y

Zacks Equity Research

CarMax Inc. KMX has posted net earnings per share of $1.59 in first-quarter fiscal 2020 (ended May 31, 2019), up 19.5% from $1.33 in the year-ago period. Moreover, earnings surpassed the Zacks Consensus Estimate of $1.49. The company’s net earnings increased 11.8% year over year to $266.7 million.

Moreover, net sales and operating revenues in the reported quarter increased 12% year over year to $5.37 billion. The figure beat the Zacks Consensus Estimate of $5.22 billion. Total gross profit rose 12.3% year over year to $742.4 million.

In first-quarter fiscal 2020, CarMax’s used-vehicle sales rose 12.9% from the prior-year period to $4.54 billion as units sold increased 13% to 224,268 vehicles. The average selling price of used vehicles declined 0.1% from the year-ago quarter to $20,050. Comparable store used-vehicle units sold rose 9.5% from the prior-year level. This robust performance reflects improved conversion and solid growth in web traffic.

Wholesale vehicle revenues rose 7.3% from a year ago to $662.4 million in the reported quarter. Units sold increased 6.6% year over year to 120,768 vehicles, courtesy of growth in store base and appraisal buy rate. The average selling price of wholesale vehicles rose 0.2% from the prior-year quarter to $5,213.

Other sales and revenues increased 6.1% year over year. Moreover, the extended protection plan’s (EPP) revenues rose 11.2% from the year-ago level.

CarMax Auto Finance (“CAF”) reported a year-over-year increase of 0.3% in income to $116 million in the quarter under review, reflecting collective effects of 7.9% rise in average managed receivables and a slightly lower total interest margin percentage.

CarMax, Inc. Price, Consensus and EPS Surprise

 

CarMax, Inc. Price, Consensus and EPS Surprise

CarMax, Inc. price-consensus-eps-surprise-chart | CarMax, Inc. Quote

Store Openings

In first-quarter fiscal 2020, CarMax opened three stores, including two in new television markets — Waco, TX, and McAllen, TX, and one in the existing market (Memphis, TN).

Share Repurchase Program

In the quarter under review, the company spent $204.8 million to repurchase 3 million shares under the existing share buyback program. As of May 31, 2019, it had $1.91 billion of authorization remaining under its share repurchase program.

Financial Position

CarMax had cash and cash equivalents of $42.2 million as of May 31, 2019, down from $76.3 million in the corresponding period of 2018. Long-term debt (excluding current position) amounted $1.49 billion as of May 31, 2019, reflecting an increase from $1.29 billion in the year-ago comparable period.

Zacks Rank & Stocks to Consider

CarMax currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the auto space are Ford Motor Company F, Fox Factory Holding Corp. FOXF and Cummins Inc. CMI, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ford has an expected long-term growth rate of 7.3%. Over the past six months, shares of the company have gained 31.6%.

Fox Factory has an expected long-term growth rate of 16.4%. Over the past six months, shares of the company have gained 46.2%.

Cummins has an expected long-term growth rate of 8%. Over the past six months, shares of the company have gained 36.7%.

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