CarMax's (KMX) Q2 Earnings & Sales Beat Estimates, Up Y/Y
CarMax Inc. KMX reported second-quarter fiscal 2021 (ended Aug 31, 2020) net earnings per share of $1.79, surpassing the Zacks Consensus Estimate of earnings of $1.03. This outperformance can be attributed to the higher-than-expected revenues from the company’s wholesale vehicles segment. Precisely, wholesale vehicle sales totaled $819.1 million, beating the consensus mark of $617 million. Encouragingly, the bottom line compares favorably with the year-ago earnings of $1.40 per share, marking a year-over-year jump of 27.9%.
The auto retailer registered revenues of $5,372.2 million during the August-end quarter, beating the Zacks Consensus Estimate of $5,209.3 million. Moreover, the top line recorded a 3.3% year-over-year increase. Total gross profit improved 8.5% year over year to $752.1 million. This outperformance can be attributed to the company successfully completing the rollout of its omni-channel offerings, providing the largest functional market of used vehicle industry.
In the first quarter of fiscal 2021, CarMax had put brakes to its store-expansion strategy. The company plans on resuming new store openings and anticipates to open roughly 10 stores in fiscal 2022.
CarMax, Inc. Price, Consensus and EPS Surprise
CarMax, Inc. price-consensus-eps-surprise-chart | CarMax, Inc. Quote
Segmental Performance
CarMax’s used-vehicle net sales summed $4,389.2 million in the reported quarter, up 1% year on year on the successful completion of the company’s omni-channel offerings, providing them the largest accessible market of the used vehicle industry. The units sold in this segment increased 3.9% year over year to 217,330 vehicles. However, the average selling price of used vehicles dropped 2.9% from the year-ago quarter to $19,991. Used-vehicle gross profit per unit came in at $2,214, higher than the prior-year quarter’s $2,183. Comparable store used-vehicle units inched up 1.2%, while revenues dropped 1.6% from the prior-year level.
In the fiscal second quarter, wholesale vehicle revenues rose 20.8% to $819.1 million from the year- ago level. Units sold also grew 5.1% year over year to 132,980 vehicles on record appraisal buy rate, partially balanced by reduced appraisal traffic. Moreover, the wholesale unit sales took advantage of an additional auction day in the reported quarter. The average selling price of wholesale vehicles climbed 15.7% from the prior-year quarter to $5,891. Wholesale vehicle gross profit per unit came in at $1,086, surpassing the year-ago period’s $928.
Other sales and revenues slid 7.2% year over year to $163.9 million in the fiscal second quarter, primarily due to an increase in third-party finance fees, balanced off to some extent by growth in extended protection plan revenues.
CarMax Auto Finance reported a 29% year-over-year increase in income to $147.2 million in the reported quarter, chiefly reflecting a fall in the provision for loan losses to $26 million from the year-earlier quarter’s $45.5 million, alongside an increase in net interest margin and average managed receivables.
Costs, Financials and Share Buyback
Selling, general and administrative expenses flared up 2% from the prior-year quarter to $490.2 million. CarMax had cash and cash equivalents of $711 million as of Aug 31, 2020. Subsequent to the end of the reported quarter, the company paid down the outstanding balance of $575.8 million in the credit revolver with cash on hand. Long-term debt (excluding the current portion) amounted to $1,896.7 million, reflecting an increase from the year-ago period’s $1,689.1 million.
In the wake of the coronavirus-induced uncertainty, CarMax had suspended the stock buyback program during the fiscal first quarter. As of Aug 31, 2020, it had $1.51 billion remaining under the share-repurchase authorization.
Zacks Rank & Stocks to Consider
CarMax currently carries a Zacks Rank #3 (Hold). Shares of the company have appreciated 20.8%, year to date, underperforming the industry’s rally of 34.1%.
Some better-ranked stocks in the same sector include Advance Auto Parts AAP, O’Reilly Automotive ORLY and AutoZone AZO. Presently, Advance Auto Parts flaunts a Zacks Rank of 1 (Strong Buy), while O’Reilly Automotive and AutoZone both carry a Zacks Rank of 2 (Buy).
You can see the complete list of today’s Zacks #1 Rank stocks here.
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