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CarMax's (KMX) Q4 Earnings & Sales Surpass Estimates, Up Y/Y

Zacks Equity Research

CarMax Inc. KMX, the leading retailer of used vehicles, posted fourth-quarter fiscal 2020 (ended Feb 29, 2020) net earnings per share of $1.30, beating the Zacks Consensus Estimate of $1.12. The bottom line also compared favorably with a profit of $1.13 per share reported in the year-ago quarter. Notably, better-than-expected revenues across all segments contributed to this outperformance.

Net sales and operating revenues in the reported quarter increased 14.9% year over year to $4.96 billion. The top line also beat the Zacks Consensus Estimate of $4.66 billion. Total gross profit rose 12.3% year over year to $672.9 million.

In fourth-quarter fiscal 2020, CarMax opened three stores — two in existing markets, in Oregon and Tennessee, and one in a new market in Indiana.

CarMax, Inc. Price, Consensus and EPS Surprise

CarMax, Inc. Price, Consensus and EPS Surprise
CarMax, Inc. Price, Consensus and EPS Surprise

CarMax, Inc. price-consensus-eps-surprise-chart | CarMax, Inc. Quote

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Segmental Performance

In the fiscal fourth quarter, CarMax’s used-vehicle sales rose 17.2% from the prior-year period to $4,253.7 million, on higher unit sales and improved average selling price. The units sold also climbed 14.7% year over year to 206,718 vehicles. The average selling price of used vehicles increased 2% from the year-ago quarter to $20,380. Used vehicle gross profit per unit came in at $2,195 compared with $2,166 in the year-ago period. Comparable store used-vehicle units and revenues rose to 11% and 13.4%, respectively, from the prior-year level. This robust performance reflects improved conversion and solid growth in web traffic.

Wholesale vehicle revenues inched up 0.8% from the year-ago period to $548.3 million in the reported quarter. Units sold also increased 2% year over year to 104,900 vehicles on growth in store base and appraisal buy rate. However, the average selling price of wholesale vehicles edged down 1.4% from the prior-year quarter to $4,954. Wholesale vehicle gross profit per unit came in at $993 versus $977 in the year-ago period.

Other sales and revenues increased 9.6% year over year to $160.5 million in the fiscal fourth quarter. Moreover, the extended protection plan’s revenues rose 17.7% to $115.7 million from the year-ago level.

CarMax Auto Finance reported a 7.9% year-over-year increase in income to $111.9 million in the quarter, reflecting collective effects of 8.2% rise in average managed receivablesand an improvement in the total interest margin percentage, partially offset by a higher loan loss provision.

Costs, Financials and Share Buyback

Selling, general and administrative expenses flared up 13% from the prior-year quarter to $484.7 million. Store openings and spending to boost the firm’s technology, along with omni-channel strategic initiatives, escalated SG&A costs.

CarMax had cash and cash equivalents of $58.2 million as of Feb 29, 2020, up from $46.93 million in the corresponding period of 2019. Long-term debt (excluding current position) amounted to $1,778.7 million, reflecting an increase from $1,649.2 million in the year-ago period.

In the reported quarter, the company spent $113.6 million to repurchase 1.2 million shares under the existing share-buyback program. As of Feb 29, 2020, it had $1.55 billion remaining under its share-repurchase authorization.

Zacks Rank & Stocks to Consider

CarMax currently carries Zacks Rank #3 (Hold).

Some better-ranked stocks in the same sector are Fox Factory Holding Corp. FOXF, Blue Bird Corporation BLBD and Adientplc ADNT. While Fox Factory sports a Zacks Rank #1 (Strong Buy), Blue Bird and Adient carry a Zacks Rank of 2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

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CarMax, Inc. (KMX) : Free Stock Analysis Report
 
Fox Factory Holding Corp. (FOXF) : Free Stock Analysis Report
 
Blue Bird Corporation (BLBD) : Free Stock Analysis Report
 
Adient PLC (ADNT) : Free Stock Analysis Report
 
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