On Aug 13, 2014, we issued an updated research report on
). This Zacks Rank #2 (Buy) stock reported a 15.15% positive
earnings surprise in the last reported quarter.
CarMax posted earnings per share of 76 cents in the first
quarter of fiscal 2015 (ended May 31, 2014), exhibiting an 18.8%
improvement from 64 cents a year ago. Earnings also surpassed the
Zacks Consensus Estimate of 66 cents.
Unlike its peers, CarMax focuses more on the used-car market,
which helps it to outperform the industry. Moreover, it rapidly
increases its store count to boost sales. During the first quarter
of fiscal 2015, CarMax opened four stores. Out of the total, three
stores were opened in new markets - Rochester, NY; Dothan, AL; and
Spokane, WA. Subsequent to the end of the first quarter, the
company opened its first store in Madison, WI.
As of May 31, 2014, CarMax operated 135 used car superstores
across 67 markets. The company intends to open 13 used car
superstores in fiscal 2015 and 10-15 superstores in each of the
next two fiscal years.
Further, CarMax consistently enhances shareholders' value
through buybacks. Banking on its business fundamentals and ability
to achieve growth objectives, the board of directors raised the
company's share repurchase authorization by $1 billion in Mar 2014.
During the first quarter of fiscal 2015, CarMax spent $174.1
million to buy back 3.8 million shares. As of May 31, 2014, the
company had an authorization of $1.11 billion remaining under the
However, incentives on new cars have encouraged consumers to
trade in their old cars for new, which has lowered used-car sales
and increased the used-car inventory. This is compelling CarMax to
slash vehicle prices in order to cut used-car inventory, thereby
Moreover, CarMax is incurring high cash outflow from operating
activities. In the first 3 months of fiscal 2015, CarMax had a cash
outflow of $209.1 million from operations, compared with $77.6
million in the prior-year period.
Other Stocks to Consider
Investors interested in automobile stocks could also consider
Tesla Motors, Inc. (
), Fox Factory Holding Corp (
) and Gentherm Incorporated (
). While Tesla sports a Zacks Rank #1 (Strong Buy), Fox Factory and
Gentherm carry a Zacks Rank #2.
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