) posted a 23.1% increase in earnings per share to 64 cents in
the first quarter of fiscal 2014 ended May 31, 2013, from 52
cents a year ago. Reported earnings also exceeded the Zacks
Consensus Estimate by 7 cents. Profits increased 21.5% to $146.7
million from $120.7 million a year ago.
Net sales and operating revenues in the quarter rose 19.3% to
$3.3 billion, topping the Zacks Consensus Estimate of $3.1
billion. The year-over-year improvement in revenues was due to
increases in used vehicle sales and wholesale vehicle sale.
Used vehicle revenues appreciated 23.4% to $2.7 billion in the
quarter, driven by both higher unit sales and average selling
prices. Unit sales increased 22.1% to 137,154 vehicles, while
average selling price increased 1.3% to $19,540. Comparable store
used vehicle unit sales rose 17% in the quarter, while it was
flat a year ago. The improvement was attributable to better
execution in stores and an attractive consumer credit
However, new vehicle revenues dipped 5.5% to $52.4 million due to
lower unit sales. Unit sales decreased 7.5% to 1,949 vehicles and
average selling price decreased 2.3% to $26,788.
Wholesale vehicle revenues grew 4.9% to $490.7 million. Unit
sales increased 5.8% to 88,356 vehicles due to improvement in
store base and a stronger appraisal buy rate. Average selling
price decreased by 1.1% to $5,388. Other sales and revenues
increased 6.4% to $66.2 million, driven by a 26% rise in revenues
from extended service plan.
Gross profit increased 17.3% to $448.1 million from $381.9
million in the year-ago quarter. The improvement was driven by
higher gross profit earned from the used vehicle businesses.
CarMax Auto Finance (CAF)
CAF reported a 15.7% increase in income to $87.0 million from
$75.2 million in last year's quarter. The improvement was
primarily driven by a 21% increase in average managed receivables
to $6.15 billion.
During the first quarter of fiscal 2014, CarMax opened 3 stores,
penetrating the Harrisonburg, Va. market and the Savannah and
Columbus markets in Ga.
At the end of the quarter, CarMax opened the fifth store in the
Houston, Texas. The company intends to open between 10 and 15
superstores in each of the next two fiscal years.
Share Repurchase Program
During the first quarter of fiscal 2014, CarMax repurchased 2.9
million shares of its common stock for $124.6 million under its
existing share repurchase program. As of May 31, 2013, the
company had $463.5 million shares remaining for repurchase under
CarMax had cash and cash equivalents of $725.3 million as of May
31, 2013, up from $456.4 million as of May 31, 2012. Total debt
(including financing and capital lease obligations, and
non-recourse notes) rose to $6.7 billion as of May 31, 2013 from
$5.2 billion as of May 31, 2012.
In the first three months of fiscal 2014, CarMax had a cash
outflow of $77.6 million compared with $115.5 million in the
prior year. Capital expenditures decreased to $42.1 million from
$47.6 million in the same period in fiscal 2012. CarMax estimated
capital expenditures of $300 million for fiscal 2014.
We appreciate CarMax's focus on the used-car market, which helps
it to outperform the industry. However, increasing competition
poses a threat to the company's earnings. The company currently
retains a Zacks Rank #3 (Hold).
While we remain on the sidelines about CarMax, stocks from the
broader industry that warrant a look include
STRATTEC Security Corporation
Magna International Inc.
). All of them carry a Zacks Rank #1 (Strong Buy).
CARMAX GP (CC) (KMX): Free Stock Analysis
MAGNA INTL CL A (MGA): Free Stock Analysis
STRATTEC SEC CP (STRT): Free Stock Analysis
VISTEON CORP (VC): Free Stock Analysis Report
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