Shares of CarMax (KMX) surged in trading after the company reported an increase in its quarterly sales for the first time in more than two years. The used vehicle retailer’s earnings soared 55.8% year-over-year to $0.81 per share, above consensus estimates of $0.61 per share.
Pick the best stocks and maximize your portfolio:
- Discover top-rated stocks from highly ranked analysts with Analyst Top Stocks!
- Easily identify outperforming stocks and invest smarter with Top Smart Score Stocks
Furthermore, the company’s revenues increased by 1.2% year-over-year to $6.2 billion in the third quarter. This surpassed Street estimates of $6.04 billion.
KMX Bought Back 1.5M Shares in Q3
Additionally, during the third quarter, the company bought back 1.5 million shares of common stock for $114.8 million. As of November 30, 2024, KMX had $2.04 billion remaining available for repurchase under the outstanding authorization.
KMX’s Management Comments on the Results
Bill Nash, President and CEO of CarMax commented, “Our solid execution and a more stable environment for vehicle valuations enabled us to deliver robust EPS growth driven by increases in unit sales and buys, solid margins, growth in CAF [CarMax Auto Finance] income, and ongoing management of SG&A [sales, general and administrative expenses].”
Used Car Retailers Have Been Under Pressure Recently
In recent quarters, used car retailers have faced weak sales as consumers increasingly opt for new vehicles with better features and competitive pricing. As a result, to clear inventory purchased at high pandemic-era prices, retailers have been forced to offer discounts, squeezing profit margins.
In fact, CarMax highlighted in June how inflation has eroded vehicle affordability, adding pressure on consumer spending. However, despite challenges, reduced prices have begun to draw some buyers back to the used car market.
Is CarMax Stock a Good Buy?
Analysts remain cautiously optimistic about KMX stock, with a Moderate Buy consensus rating based on nine Buys, four Holds, and one Sell. Over the past year, KMX has increased by more than 5%, and the average KMX price target of $86.75 implies an upside potential of 6.5% from current levels. These analyst ratings are likely to change following KMX’s results today.
