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CarMax (KMX) to Report Q3 Earnings: What in the Offing?

Zacks Equity Research

CarMax Inc. KMX is set to report third-quarter fiscal 2019 results, before the market opens on Dec 21. In the last reported quarter, the company recorded an earnings beat of 1.6%. In the trailing four quarters, it surpassed estimates twice while missing estimates in the other two, the average miss being 0.8%.

In the past three months, shares of CarMax have underperformed the industry it belongs to. The stock declined 12% compared with the industry’s increase of 25%.

Let’s see how things are shaping up for the upcoming announcement.

CarMax, Inc. Price and EPS Surprise

 


CarMax, Inc. Price and EPS Surprise | CarMax, Inc. Quote

Factors Influencing This Quarter

CarMax pursues an aggressive store expansion initiative. During second-quarter fiscal 2019, the company opened three stores. The company entered the television market in Macon, GA, and added two stores in existing television markets (comprising Albuquerque, NM, and Oklahoma City, OK). Further, within 12 months, starting from Aug 31, 2018, CarMax intends to enter 10 new television markets and expand presence in five existing ones.

During the first half of fiscal 2019, CarMax’s selling, general and administrative (“SG&A”) expenditure witnessed year-over-year rise of around 10.3% to $891.8 million. This escalation is mainly on account of expenses related to store openings. Increased investments to develop technology and digital platforms, and rising compensation expenses are also contributing to the headwind. For fiscal 2019, the company projects capital expenditure of around $340 million.

For the soon-to-be-released quarter, the Zacks Consensus Estimate for net sales of wholesale vehicles is pegged at $567 million. In second-quarter fiscal 2019, net sales of wholesale vehicles were $628 million.

For used-vehicle retail, the Zacks Consensus Estimate for net sales is pegged at $3.62 billion. In the last reported quarter, the company recorded net sales of $4 billion.

The Zacks Consensus Estimate for the Other segment’s sales is $141 million, whereas the company recorded $163 million in the last reported quarter.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for CarMax this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as you will see below.

Earnings ESP: CarMax’ Earnings ESP is -1.64% as the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at $1 and $1.01, respectively.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: CarMax presently carries a Zacks Rank #3.

We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

Stocks to Consider

Here are a few stocks worth considering from the same space:

Tower International, Inc. TOWR currently has a Zacks Rank #3. In third-quarter 2018, the company delivered earnings of $1.08 per share, beating the Zacks Consensus Estimate of 97 cents.

You can see the complete list of today’s Zacks #1 Rank stocks here.

AutoZone, Inc. AZO presently has a Zacks Rank #3. In the first quarter of fiscal 2019, the company delivered earnings of $13.47 per share, beating the Zacks Consensus Estimate of $12.21.

Dana Incorporated DAN currently has a Zacks Rank #3. In third-quarter 2018, the company delivered earnings of 77 cents per share, beating the Zacks Consensus Estimate of 74 cents.

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CarMax, Inc. (KMX) : Free Stock Analysis Report
 
AutoZone, Inc. (AZO) : Free Stock Analysis Report
 
Dana Incorporated (DAN) : Free Stock Analysis Report
 
Tower International, Inc. (TOWR) : Free Stock Analysis Report
 
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