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Shares Rise After CarMax's 4th-Quarter Results Impress

- By Mayank Marwah

CarMax Inc. (KMX) released fourth-quarter and full-year 2018 earnings before the opening bell on March 29. The used car retailer said its top line missed expectations while its bottom line surpassed estimates. In premarket trading, the company's stock surged 4%.

Earnings highlights

The company's fourth-quarter earnings grew a mammoth 68.7% to $1.13 per share. Revenue was $4.32 billion, missing the Zacks Consensus Estimate of $4.39 billion. The gross profit amounted to $599.4 million, up 11.7%.


Sales of used vehicles climbed 5.8% year over year to $3.6 billion, while volume sales jumped 5.6% to 180,207 units. Comparable store used-vehicle unit sales increased 2.8% from the prior-year quarter. Wholesale unit sales rose 3.7% owing to growth in its store base.

In a statement, CEO Bill Nash said CarMax saw double-digit growth in pretax earnings during the quarter and continued to buy back shares as a result of strong cash flow.

"We're also pleased with the response to our omni-channel roll-out in Atlanta, where consumers can now buy a car completely from home, in-store or through a seamlessly integrated combination of online and in-store experiences," he added. "We remain on track to have this experience available to the majority of our customers by the end of fiscal 2020."

Auto finance division

CarMax reported quarterly income of $103.7 million in its auto finance segment, up 2.6% from the year-ago quarter. This growth was attributable to a 7.8% rise in average managed receivables, coupled with a slightly lower total interest margin percentage.

Store details

During the quarter, the company opened five used car stores. For the year, it opened 15 stores, bringing its store count to 203 as of Feb. 28.

Looking ahead, the company plans to open as many as 13 stores in both fiscal 2020 and 2021.

Capital expenditure plans

The used car retailer estimates capital spending of $350 million in fiscal 2020, primarily on account of adding three customer experience centers to sustain omni-channel rollout and shifting spending to 2020 that was originally planned for 2019.

Disclosure: I do not hold any positions in the stocks mentioned.

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This article first appeared on GuruFocus.