CarMax Inc.
(
KMX
) posted a profit of $95.0 million or 41 cents per share in the
fourth quarter of fiscal 2012 ended February 29, 2012, barely
exceeding the Zacks Consensus Estimate by a penny. The profit
increased 7% from $88.8 million or 39 cents per share in the
prior-year quarter.
For the full fiscal year, the company's profit grew 10% to
$413.8 million or $1.79 per share from $377.5 million or $1.65 per
share in fiscal 2011. The profit was in line with the Zacks
Consensus Estimate.
Net sales and operating revenues in the quarter rose 10% to
$2.48 billion, which was higher than the Zacks Consensus Estimate
of $2.42 billion. For the fiscal year, net sales and operating
revenues escalated 11% to $10.00 billion from the prior year,
topping the Zacks Consensus Estimate of $9.94 billion.
Used vehicle revenues appreciated 9.7% to $1.97 billion in the
quarter, mainly driven by both higher unit sales and average
selling prices. Unit sales increased 5.8% to 105,769 vehicles while
average selling price increased 3.5% to $18,495.
However, new vehicle revenues dipped 6.3% to $45.8 million due
to lower unit sales. Unit sales decreased 11.6% to 1,727 vehicles
while average selling price increased 6% to $26,409.
Wholesale vehicle revenues grew 18.1% to $395.7 million,
primarily driven by higher unit sales. Unit sales increased 13.3%
to 73,897 vehicles while average selling price increased by $204 to
$5,208. Other sales and revenues slipped 11.7% to $60.6 million,
driven by a $10.1 million fall in revenues from third-party finance
fees (net).
Total gross profit rose 5% to $338.2 million from $320.7 million
in the fourth quarter of fiscal 2011, due to higher contribution
from retail and wholesale vehicles, partly offset by a reduction in
other gross profit. Total gross profit per retail unit was flat at
$3,146 compared with the corresponding quarter a year ago.
Selling, general and administrative expenses (SG&A)
increased 7% to $243.5 million. The increase was attributable to
expansion of the company's store base, increases in sales
commissions and other variable costs, and higher growth-related
costs, partly offset by lower advertising expenses. SG&A per
used unit increased slightly by $32 to $2,302 in the quarter.
CarMax Auto Finance (
CAF
)
CAF reported a 22% increase in income to $66.1 million from
$54.1 million in last year's quarter, primarily driven by an
increase in interest margin on the back of increases in both
average managed receivables and the spread between the interests
charged to consumers and related funding costs. For the full fiscal
year, CAF income was $262.2 million, up 19.2% from $220.0 million
in the fiscal 2011.
Financial Position
CarMax had cash and cash equivalent of $442.7 million as of
February 29, 2012, up significantly from $41.1 million as of
February 28, 2011. Total debt (including financing and capital
lease obligations, and non-recourse notes) rose to $5.05 billion as
of February 29, 2012 from $4.39 billion as of February 28, 2011.
However, debt to capitalization ratio was lower at 65.4% as of
February 29, 2012compared with 66.2% a year ago.
In fiscal 2012, CarMax had a cash outflow of $62.1 million
compared with $6.8 million in the prior year. The increase in cash
outflow was mainly attributable to decline in auto loans
receivables and unfavorable changes in Other liabilities.
Meanwhile, capital expenditures increased significantly to $172.6
million from $76.6 million in fiscal 2011.
Our Take
We appreciate CarMax's focus on the used-car market, which helps
it to outperform the industry. The automotive retailer is among the
strongest operators in its peer group, which includes
AutoNation Inc.
(
AN
) and
Penske Automotive Group
(
PAG
).
However, increasing competition pose a threat to the company's
earnings. Further, CarMax's utilization of CAF to keep funding
retail sales in an unstable credit environment adds further
uncertainty to the stream of earnings, which is still significant
for its profitability.
As a result, the company retained its Zacks #3 Rank (Hold) for
the short term (1 to 3 months) and we maintain our Neutral
recommendation on the stock for long term (more than 6 months).
AUTONATION INC (
AN
): Free Stock Analysis Report
CARMAX GP (CC) (
KMX
): Free Stock Analysis Report
PENSKE AUTO GRP (
PAG
): Free Stock Analysis Report
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