CarMax's (KMX) Q3 Earnings Beat Estimates, Revenues Miss

CarMax Inc. (NYSE:KMX) posted earnings per share of $1.09 in the third quarter of fiscal 2019 (ended Nov 30, 2018), up 34.6% from 81 cents in the year-ago quarter. Moreover, earnings surpassed the Zacks Consensus Estimate of $1.01.

Net sales and operating revenues in the reported quarter increased 4.6% year over year to $4.3 billion. However, the figure missed the Zacks Consensus Estimate of $4.33 billion. Total gross profit rose 5.6% year over year to $569.2 million.

During the quarter under review, used-vehicle revenues rose 3.6% to $3.5 billion as unit sales increased 2.3% to 173,476 vehicles. The average selling price of used vehicles rose 1.3% to $27,273. Comparable store used-vehicle unit sales declined 1.2%. The downside was primarily caused by lower store traffic, partially offset by improved conversion.

Wholesale vehicle revenues rose 9.2% to $603.6 million in the reported quarter. Unit sales increased 10% to 110,403 vehicles, courtesy of a boost in store base and a higher appraisal buy rate. The average selling price of wholesale vehicles declined 1% to $5,214.

Other sales and revenues increased 12.1% year over year. Moreover, the extended protection plan’s (EPP) revenues rose 11.1%.

CarMax Auto Finance (“CAF”) reported an increase of 6.7% in income to $109.7 million in the quarter under review, reflecting collective effects of an 8.4% rise in average managed receivables and a slightly lower total interest margin percentage.

CarMax, Inc. Price, Consensus and EPS Surprise

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

Store Openings

During third-quarter fiscal 2019, CarMax opened four stores in new television markets of Wilmington, NC; Lafayette, LA; Corpus Christi, TX; and Shreveport, LA.

Share Repurchase Program

In the quarter under review, CarMax spent $254.3 million to repurchase 3.7 million shares under the existing share buyback program. Also, the board approved a share repurchase extension of $2 billion. As of Nov 30, 2018, the company had $2.38 billion of authorization remaining under its share repurchase program.

Financial Position

CarMax had cash and cash equivalents of $35 million as of Nov 30, 2018, up from $26.3 million as of Nov 30, 2017. Long-term debt (excluding current position) amounted to $992.1 million as of Nov 30, 2018, down from $1.04 billion as of Nov 30, 2017.

Zacks Rank & Stocks to Consider

Currently, CarMax has a Zacks Rank #3 (Hold).

A few better-ranked stocks in the auto space are Allison Transmission Holdings, Inc. (NYSE:ALSN) , Fox Factory Holding Corp. (NASDAQ:FOXF) and America’s Car-Mart, Inc. (NASDAQ:CRMT) , each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Allison Transmission has an expected long-term growth rate of 10%. Over the past six months, shares of the company have increased 2.5%.

Fox Factory has an expected long-term growth rate of 17.9%. Over the past six months, shares of the company have risen 20.5%.

America’s Car-Mart has an expected long-term growth rate of 19.5%. Over the past six months, shares of the company have grown 10.1%.

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