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CarMax's (KMX) Earnings Surpass Estimates in Q4, Rise Y/Y

Zacks Equity Research

CarMax Inc. KMX posted net earnings per share of $1.13 in fourth-quarter fiscal 2019 (ended Feb 28, 2019), up 68.7% from 67 cents in the year-ago period. Moreover, earnings surpassed the Zacks Consensus Estimate of $1.04 per share. The company’s net earnings increased 57.6% year over year to $192.6 million.

Moreover, net sales and operating revenues in the reported quarter increased 5.7% year over year to $4.32 billion. However, the figure missed the Zacks Consensus Estimate of $4.39 billion. Total gross profit rose 11.7% year over year to $599.4 million.

During fourth-quarter fiscal 2019, CarMax’s used-vehicle sales rose 5.8% from the prior-year period to $3.6 billion as unit sales increased 5.6% to 180,207 vehicles. The average selling price of used vehicles rose 0.3% from the year-ago quarter to $19,978. Comparable store used-vehicle unit sales rose 2.8% from the prior-year level. The improved performance reflects improved conversion, partially offset by lower store traffic.


CarMax, Inc. Price, Consensus and EPS Surprise


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

Wholesale vehicle revenues rose 3.1% from a year ago to $543.8 million in the reported quarter. Unit sales increased 3.7% year over year to 102,887 vehicles, courtesy of growth in store base. The average selling price of wholesale vehicles declined 1% from the prior-year quarter to $5,024.

Other sales and revenues increased 14.6% year over year. Moreover, the extended protection plan’s (EPP) revenues rose 19.9% from the year-ago level.

CarMax Auto Finance (“CAF”) reported a year-over-year increase of 2.6% in income to $103.7 million in the quarter under review, reflecting collective effects of a 7.8% rise in average managed receivables and a slightly lower total interest margin percentage.

Fiscal 2019 Results

In the fiscal year, the company’s net earnings increased 33.1% year over year to $4.79 per share.

The company’s net sales and operating revenues improved 6.1% to $18.2 billion from the year-ago figure of $17.1 billion.

Store Openings

During fourth-quarter fiscal 2019, CarMax opened five stores, which included three stores in new television markets, namely Buffalo, NY; Montgomery, AL; and New Orleans, LA. During the fiscal year, it opened 15 stores that led to a total store count of 203 used car stores as of Feb 28, 2019.

Share Repurchase Program

In the quarter under review, CarMax spent $270.1 million to repurchase 4.4 million shares under the existing share buyback program. During the fiscal year, it repurchased 13.6 million shares of common stock for $902.9 million. As of Feb 28, 2019, the company had $2.11 billion of authorization remaining under its share repurchase program.

Financial Position

CarMax had cash and cash equivalents of $47 million as of Feb 28, 2019, up from $44.5 million in the corresponding period of 2018. Long-term debt (excluding current position) amounted to $1.2 billion as of Feb 28, 2019, reflecting an increase from $995 million in the comparable year-ago period.

Plans for Fiscal 2020

CarMax plans to open 13 stores in fiscal 2020 and 2021 each. Further, it projects $350 million capital expenditure in fiscal 2020 owing to change in spending plans and the addition of three customer experience centers to support omni-channel roll-out.

Zacks Rank & Stocks to Consider

CarMax currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader auto sector are Fox Factory Holdings Corporation FOXF, Oshkosh Corporation OSK and General Motors Company GM, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Fox Factory has an expected long-term growth rate of 15.1%. Over the past three months, shares of the company have gained 18.3%.

Oshkosh’s long-term growth rate is projected at 11.3%. Shares of the company have gained 20.3% over the past three months.

General Motors has an expected long-term growth rate of 8.9%. Shares of the company have gained 10.8% over the past three months.

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