U.S. markets close in 5 hours 22 minutes
  • S&P 500

    4,264.61
    -40.59 (-0.94%)
     
  • Dow 30

    33,921.65
    -230.36 (-0.67%)
     
  • Nasdaq

    12,894.25
    -208.30 (-1.59%)
     
  • Russell 2000

    1,990.04
    -30.49 (-1.51%)
     
  • Crude Oil

    88.04
    +1.51 (+1.75%)
     
  • Gold

    1,782.30
    -7.40 (-0.41%)
     
  • Silver

    19.80
    -0.29 (-1.44%)
     
  • EUR/USD

    1.0176
    +0.0005 (+0.05%)
     
  • 10-Yr Bond

    2.8770
    +0.0530 (+1.88%)
     
  • GBP/USD

    1.2060
    -0.0035 (-0.29%)
     
  • USD/JPY

    135.2690
    +1.0540 (+0.79%)
     
  • BTC-USD

    23,442.45
    -355.21 (-1.49%)
     
  • CMC Crypto 200

    556.16
    -16.66 (-2.91%)
     
  • FTSE 100

    7,515.81
    -20.25 (-0.27%)
     
  • Nikkei 225

    29,222.77
    +353.86 (+1.23%)
     

Can CarMax (KMX) Robust Sales Offset Cost Woes in Q4 Earnings?

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
·5 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

CarMax Inc. KMX is slated to release fourth-quarter fiscal 2022 results on Apr 12, before the opening bell. The Zacks Consensus Estimate for the quarter’s earnings and revenues is pegged at $1.28 per share and $7.58 billion, respectively.

The used car dealership chain posted an earnings beat in the last reported quarter on higher-than-anticipated revenues from the company’s used and wholesale vehicles segment. Over the trailing four quarters, CarMax surpassed estimates on three occasions while missing once, with the average surprise being 14.3%. This is depicted in the graph below:

CarMax, Inc. Price and EPS Surprise

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

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

Trend in Estimate Revision

The Zacks Consensus Estimate for CarMax’s fiscal fourth-quarter earnings per share has been revised downward by 6 cents in the past seven days. The bottom-line projection, however, indicates a slight year-over-year improvement of 0.8%. The Zacks Consensus Estimate for quarterly revenues suggests year-over-year growth of 46.8%.

Factors to Note

Robust demand for used vehicles is likely to aid CarMax’s fiscal fourth-quarter results. With supply chain snarls affecting the production of new vehicles, many consumers have migrated toward the used-vehicle market, which is likely to have been a positive for the used vehicle retailer CarMax. Also, the average selling price (ASP) of used cars has been rising amid a supply-demand mismatch, which should have buoyed CarMax’s fourth-quarter fiscal 2022 revenues. CarMax’s omni-channel efforts to optimize customer shopping experience are also likely to have supported the top line during the to-be-reported quarter.

The Zacks Consensus Estimate for CarMax’s net sales from used vehicles is $5,607 million, indicating an uptick from $4,328 million recorded in the prior-year quarter. For the February-end quarter, the consensus estimate for ASP is pegged at $27,270, indicating an increase from the year-ago figure of $20,980. The Zacks Consensus Estimate for quarterly gross profit from the used-vehicle segment is pegged at $433 million, calling for a rise from $427.6 million reported in the year-earlier quarter.

The auto retailer’s consistent efforts to modernize wholesale auction platforms are also likely to have aided the company during the quarter under review. The Zacks Consensus Estimate for quarterly net sales of wholesale vehicles is pegged at $1,638 million, indicating an increase from the prior-year period’s $679 million. The Zacks Consensus Estimate for quarterly gross profit from the wholesale vehicle segment is pegged at $168 million, suggesting a surge from the $102.6 million reported in the prior-year quarter.

On the flip side, CarMax has been bearing the brunt of escalating SG&A expenses owing to higher advertising costs, store expansion efforts and omnichannel marketing strategies. The trend is expected to have continued in the to-be-reported quarter as well, thereby denting margins. Also, store expansion and digitization efforts might have clipped profits to some extent.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for CarMax this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here.

Earnings ESP: CarMax has an Earnings ESP of +0.36%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: CarMax currently carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank stocks here.

Peer Releases

CarMax’s key peers include O’Reilly Automotive ORLY and AutoZone AZO.

O’Reilly posted fourth-quarter 2021 results on Feb 9. It posted adjusted earnings per share of $7.64, surpassing the Zacks Consensus Estimate of $6. The bottom line also increased from $5.40 a share recorded in the prior-year quarter. The company surpassed the Zacks Consensus Estimate for earnings in the last four quarters, with an average of 22.2%.

ORLY registered quarterly revenues of $3,291.5 million, beating the consensus mark of $3,066.7 million. The top line was also 16.36% higher than the prior-year figure of $2,828.8 million. The stock currently holds a Zacks Rank #3.

AutoZone reported first-quarter fiscal 2022 (ended Nov 20, 2021) results on Dec 7. Its quarterly earnings of $25.69 per share surged from the prior-year figure of $18.61. The bottom line also surpassed the Zacks Consensus Estimate of $20.83. The company surpassed the Zacks Consensus Estimate for earnings in the last four quarters, with an average of 23.2%.

AZO’s sales in the last reported quarter grew 16.3% year over year to $3,668.9 million. The top line also outpaced the Zacks Consensus Estimate of $3,358 million. Domestic same-store sales for first-quarter fiscal 2022 rose 13.6%, handily beating the Zacks Consensus Estimate of 3.9%. The stock currently carries a Zacks Rank #3.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

O'Reilly Automotive, Inc. (ORLY) : Free Stock Analysis Report

AutoZone, Inc. (AZO) : Free Stock Analysis Report

CarMax, Inc. (KMX) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research