CarMax Inc. KMX is set to release fiscal fourth-quarter 2020 results on Apr 2, before the opening bell. The Zacks Consensus Estimate for the quarter to be reported is a profit of $1.12 on revenues of $4.65 billion.
The specialty retailer of used and new vehicles came up with weaker-than-expected earnings in the last reported quarter due to lower-than-anticipated revenues across the wholesale vehicle segment. As far as earnings surprises are concerned, CarMax surpassed the Zacks Consensus Estimate in three of the last four quarters, with average positive surprise of 2.57%. This is depicted in the graph below:
CarMax, Inc. Price and EPS Surprise
CarMax, Inc. price-eps-surprise | CarMax, Inc. Quote
Investors are expecting an earnings beat for CarMax — whose peers include Advance Auto Parts, Inc. AAP, O'Reilly Automotive, Inc. ORLY and AutoZone, Inc. AZO — this time as well. Encouragingly, our model also indicates the same.
Trend in Estimate Revision
The Zacks Consensus Estimate for fiscal fourth-quarter 2020 earnings per share has been upwardly revised by a penny in the past 60 days. However, it indicates a 0.9% decrease from the year-ago reported earnings of $1.13 per share. Nonetheless, the Zacks Consensus Estimate for revenues indicates year-over-year growth of 7.7%.
Factors to Note
CarMax’s extensive focus on the used vehicle market is likely to have buoyed earnings in the quarter to be reported. Expensive new vehicles led to robust demand for cheaply available used vehicles. This is anticipated to have driven sales. The Zacks Consensus Estimate for used-vehicles sales, which contribute to bulk of its revenues, is pegged at $4,021 million. This indicates an increase from the year-ago level of $3,628 million. Gross profit for used-vehicle unit is expected to rise to $426 million from $390 million in the year-ago quarter.
The firm’s aggressive store expansion initiatives are expected to reflect on the upcoming results. CarMax’s efforts to enhance the digital platform are likely to have increased website traffic. The Zacks Consensus Estimate for net sales of wholesale vehicles is pegged at $549 million, indicating an increase from $544 million generated in the year-ago quarter. Further, the consensus estimate for revenues from other segments is $149 million, implying an increase from $146 million recorded a year ago.
Overall, CarMax is likely to have benefited from increased revenues from used-vehicle and wholesale segments. Nonetheless, as the firm is undertaking aggressive store expansion initiatives, SG&A expenses are likely to have soared in the to-be-reported quarter, thereby denting margins to some extent.
Our proven model predicts an earnings beat for CarMax this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
CarMax has an Earnings ESP of +0.13% and currently carries a Zacks Rank #3.
You can see the complete list of today’s Zacks #1 Rank stocks here.
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O'Reilly Automotive, Inc. (ORLY) : Free Stock Analysis Report
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