🧐 ProPicks AI October update is out now! See which stocks made the listPick Stocks with AI

CarMax beats second-quarter revenue estimates on higher unit sales

Published 09/26/2024, 08:08 AM
Updated 09/26/2024, 01:11 PM
© Reuters. FILE PHOTO: CarMax logo is seen in this illustration taken June 27, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
KMX
-

By Ananta Agarwal

(Reuters) -Used car retailer CarMax (NYSE:KMX) beat Wall Street estimates for second-quarter revenue on Thursday as price cuts on used vehicles boosted unit sales, especially in the retail segment, sending its shares up 6.4% in afternoon trading.

Pre-owned vehicle retailers have had a bumpy ride, with profitability worsening as availability of new vehicles improved after tight supply during the pandemic, which had pushed up prices of used cars.

CarMax has employed a host of cost-cutting measures over the past few years to protect its margins, including slashing marketing and capital expenditures.

The company reported a 2.9% increase in the number of vehicles sold in the second quarter. In its retail segment, unit sales rose 5.1% and revenue was up 1.5% from a year ago.

However, the tailwinds in unit sales were offset by a decline in CarMax's income from lending as the company had to increase provisions for loan losses.

Weaker consumer budgets have negatively impacted car loan payments for some borrowers, data has shown.

The company's overall quarterly revenue of $7.01 billion was down about 1% from a year ago. However, it was above analysts' average estimate of $6.79 billion, according to LSEG data.

Despite higher provisions, the key takeaway is that there is a "bigger inflection in retail sales," said Sharon Zackfia, equity analyst at William Blair.

"We believe the momentum in future quarters can more than offset higher loan provisions," Zackfia said.

© Reuters. FILE PHOTO: CarMax logo is seen in this illustration taken June 27, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

The company's second-quarter average selling price per vehicle was down 4.6% and 12.9% in used retail and wholesale units, respectively.

The company's earnings per share of 85 cents in the second quarter was below the estimates of 86 cents, but were 13.3% higher than 75 cents a year earlier.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.