CarMax (KMX) shares jumped 7.2% on June 24 after the company delivered impressive first-quarter results, topping both earnings and revenue estimates.
Based in the U.S., CarMax, Inc. is a used vehicle retailer and a wholesale vehicle auction operator. It operates two business segments: CarMax Sales Operations and CarMax Auto Finance.
Q1 Beat
Adjusted earnings of $1.56 per share beat analysts’ expectations of $1.49 per share. However, it was much lower than the company’s reported earnings of $2.63 per share for the prior-year period.
Further, revenues jumped 21% year-over-year to $9.3 billion and exceeded consensus estimates of $9.15 billion.
Despite the revenue growth, vehicles sold were down 5.5% year-over-year to 427,257 units. Retail used unit sales declined 11% to 240,950 vehicles and comparable store used unit sales decreased 12.7%, offsetting Wholesale units sales growth of 2.7% to 186,307 vehicles.
CEO’s Comments
CarMax CEO, Bill Nash, commented, “All of our retail customers are now able to transact online on their own. We will now turn our efforts to further improving the experience for customers and associates by focusing on the seamlessness of our online and in-store offerings.”
Wall Street’s Take
Despite the earnings beat, BofA Securities analyst John Murphy decreased the price target on CarMax to $146 (48.43% upside potential) from $165 and reiterated a Hold rating.
Overall, the stock commands a Moderate Buy consensus rating based on six Buys and five Holds. The average CarMax price target of $117.78 implies a 19.74% upside potential to current levels.
Increased Hedge Fund Trading
TipRanks’ Hedge Fund Trading Activity tool shows that confidence in KMX is currently Positive, as some of the top hedge funds that were active in the last quarter increased their cumulative holdings by 235,700 shares.
Conclusion
Despite the challenging market environment and decreasing consumer confidence due to rising inflation that led to the decline in vehicle sales, the company managed to report an impressive top line and bottom line beat, which is laudable.
Furthermore, management remains confident in growing profitable market share and reaping the benefits of its strategic priorities, especially through MaxOffer, the digital appraisal product for dealers that reported 183.4% growth year-over-year during the quarter.
