CarMax (NYSE:KMX) Announces Earnings Results

CarMax (NYSE:KMX) released its earnings results on Tuesday. The company reported $1.16 EPS for the quarter, beating the consensus estimate of $0.73 by $0.43, FiscalAI reports. CarMax had a return on equity of 7.76% and a net margin of 1.06%.The company had revenue of $7.88 billion during the quarter, compared to analysts’ expectations of $7.09 billion. During the same period last year, the firm earned $0.64 EPS. The business’s revenue for the quarter was up 19.5% on a year-over-year basis.

Here are the key takeaways from CarMax’s conference call:

• Strong second-quarter performance: Used unit comps rose 13%, total vehicle sales increased 15%, and EPS grew 81% year over year to $1.16, supported by stronger volume, EPP profitability, CAF income, and SG&A leverage.
• CarMax said sharper pricing, reconditioning efficiencies, improved pricing algorithms, digital enhancements, and industry-wide FTC fee transparency helped drive sales; management expects continued momentum and plans to resume share repurchases at a modest pace in the third quarter.
• The redesigned Extended Protection Plan and new wheel, tire, and dent offering lifted EPP margin by $46 per unit in the quarter, while management remains on track for approximately $35 of full-year incremental EPP margin per unit.
• Management expects fiscal 2027 retail gross profit per unit to decline by less than the previously projected $200, but still anticipates year-over-year GPU declines in both the third and fourth quarters as it balances pricing competitiveness with demand and margins.
• CAF income is expected to be slightly below fiscal 2026 despite plans to originate nearly $1 billion in Tier 2 loans, and the company expects roughly $50 million of non-cash, non-recurring pension settlement charges, split between the third and fourth quarters.

CarMax Trading Down 6.3%

KMX opened at $55.51 on Thursday. The firm’s fifty day moving average is $59.52 and its two-hundred day moving average is $50.30. The company has a debt-to-equity ratio of 2.66, a quick ratio of 0.82 and a current ratio of 2.33. The firm has a market cap of $7.88 billion, a PE ratio of 27.08, a price-to-earnings-growth ratio of 1.88 and a beta of 1.17. CarMax has a twelve month low of $30.26 and a twelve month high of $65.28.

Analyst Ratings Changes

A number of research firms have issued reports on KMX. Bank of America upped their target price on shares of CarMax from $45.00 to $50.00 and gave the company an “underperform” rating in a research report on Wednesday. Truist Financial boosted their price target on shares of CarMax from $50.00 to $60.00 and gave the stock a “hold” rating in a research note on Wednesday. Robert W. Baird raised their price objective on shares of CarMax from $64.00 to $70.00 and gave the company an “outperform” rating in a research note on Wednesday. Royal Bank Of Canada lifted their target price on shares of CarMax from $45.00 to $56.00 and gave the stock a “sector perform” rating in a report on Wednesday. Finally, Barclays upped their target price on shares of CarMax from $61.00 to $67.00 and gave the company an “equal weight” rating in a research report on Wednesday. Two analysts have rated the stock with a Buy rating, fourteen have given a Hold rating and three have given a Sell rating to the stock. According to MarketBeat, CarMax currently has an average rating of “Reduce” and a consensus price target of $56.71.

CarMax News Summary

Here are the key news stories impacting CarMax this week:

• Positive Sentiment: CarMax reported adjusted earnings of $1.16 per share, well above the $0.73 consensus estimate, while revenue rose 19.5% year over year to $7.88 billion, exceeding expectations of $7.09 billion. Used-vehicle sales growth and stronger unit volumes were the primary catalysts. CarMax Tops Q2 Earnings and Revenue Estimates
• Positive Sentiment: Retail used-unit comparable sales increased approximately 13%, and management cited pricing initiatives, cost controls and improved execution as evidence that its turnaround is gaining traction. CarMax also signaled that share repurchases could resume in the third quarter and is targeting approximately $200 million in fiscal 2027 exit-rate savings. CarMax Signals Resumption of Share Repurchases
• Positive Sentiment: Several analysts raised their price targets following the results, including RBC to $56 and Baird to $70; Baird maintained an outperform rating. CarMax Analysts Boost Their Forecasts
• Neutral Sentiment: CarMax will host a strategic update webcast on November 3, where management is expected to discuss its GEAR strategy, growth priorities and multiyear financial framework. The event could provide additional guidance on the turnaround. CarMax Strategic Update Webcast
• Negative Sentiment: Investors questioned the quality and sustainability of the earnings beat. Retail gross profit per used vehicle fell $111 to $2,105, wholesale gross profit per unit declined $135 to $858, and management expects CarMax Auto Finance income to be slightly lower in fiscal 2027. Those margin and financing headwinds overshadowed the strong sales growth and contributed to the shares later decreasing after the initial earnings-related increase. CarMax Slides as Investors Reassess Margin Pressure

CarMax Company Profile

CarMax, Inc is a retailer of used vehicles operating in the United States. The company sells a broad selection of used cars, trucks and SUVs through its dealership network and online platform, offering customers the ability to research, purchase and arrange delivery for vehicles through an omnichannel shopping experience.

In addition to retail vehicle sales, CarMax provides vehicle financing through CarMax Auto Finance and offers customers access to extended protection products and related services.