Cars and Drivers

What to Expect From CarMax Earnings

Chris Lange

Published: June 20, 2016 3:47 pm

Last Updated: January 13, 2020 6:35 am

CarMax Inc. (NYSE: KMX) is set to report fiscal first-quarter financial results before the markets open Tuesday. The consensus estimates from Thomson Reuters are calling for $0.92 in earnings per share (EPS) on $4.20 billion in revenue. The same period from last year had $0.86 in EPS on $4.01 billion in revenue.

CarMax has struggled lately as the combination of dislocations in the truck and sport utility vehicle (SUV) market and more challenging comparisons have weighed on used car unit comp growth at the chain. Although headwinds persist, analysts are optimistic that shares now largely seem to discount for nearer term challenges and that used car sales growth at CarMax should rebound as 2016 progresses.

The company delivered solid revenue and EPS growth in both the fourth quarter and the fiscal year, it opened a record number of stores and made progress toward optimizing its capital structure by buying back 16.3 million shares in fiscal 2016.

However this has not been enough to prop the stock up for that time alone. CarMax will have to continue to make improvements on the bottom line going forward if it wants to turn positive.

A few analysts weighed in on the company during this quarter prior to the release of the earnings report:

• Wedbush reiterated a Hold rating with a $44 price target.
• Oppenheimer reiterated a Buy rating with a $60 price target.
• Merrill Lynch reiterated a Buy rating.
• RBC Capital reiterated a Hold rating.
• Deutsche Bank has a Hold rating with a $67 price target.
• Morgan Stanley has an Equal Weight rating with a $52 price target.

So far in 2016 CarMax has underperformed the broad markets with the stock down 7%. Over the past 52-weeks, the stock is actually down over 30%.

Shares of CarMax were last trading up 1.6% at $50.94, with a consensus analyst price target of $60.81 and a 52-week trading range of $41.25 to $70.88.