Party Time: Brokers Just Made Major Increases To Their CarMax, Inc. (NYSE:KMX) Earnings Forecasts
Celebrations may be in order for CarMax, Inc. (NYSE:KMX) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. The consensus statutory numbers for both revenue and earnings per share (EPS) increased, with their view clearly much more bullish on the company's business prospects. CarMax has also found favour with investors, with the stock up an impressive 13% to US$127 over the past week. It will be interesting to see if today's upgrade is enough to propel the stock even higher.
Following the upgrade, the most recent consensus for CarMax from its 15 analysts is for revenues of US$27b in 2022 which, if met, would be a substantial 32% increase on its sales over the past 12 months. Per-share earnings are expected to shoot up 48% to US$6.76. Prior to this update, the analysts had been forecasting revenues of US$23b and earnings per share (EPS) of US$5.79 in 2022. So we can see there's been a pretty clear increase in analyst sentiment in recent times, with both revenues and earnings per share receiving a decent lift in the latest estimates.
See our latest analysis for CarMax
Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of US$137, suggesting that the forecast performance does not have a long term impact on the company's valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values CarMax at US$165 per share, while the most bearish prices it at US$70.00. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.
Of course, another way to look at these forecasts is to place them into context against the industry itself. It's clear from the latest estimates that CarMax's rate of growth is expected to accelerate meaningfully, with the forecast 45% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 5.4% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 9.8% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that CarMax is expected to grow much faster than its industry.
The Bottom Line
The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for this year, expecting improving business conditions. They also upgraded their revenue estimates for this year, and sales are expected to grow faster than the wider market. Some investors might be disappointed to see that the price target is unchanged, but we feel that improving fundamentals are usually a positive - assuming these forecasts are met! So CarMax could be a good candidate for more research.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for CarMax going out to 2026, and you can see them free on our platform here..
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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