) is expected to release its third quarter fiscal 2013 results
before the market opens on December 20. The company posted a loss
of 48 cents per share in the second quarter of the fiscal year,
ended on August 31; well below the Zacks Consensus Estimate of 52
cents. In the upcoming quarter, the Zacks Consensus Estimate for
the company is a profit of 39 cents per share, reflecting an
annualized estimated growth of 7.26%.
With respect to earnings surprise, the company has missed the
Zacks Consensus Estimate in two of the trailing four quarters,
outperformed in one of the quarter and was in line in the other.
With this, the company has delivered an average earnings surprise
of -3.48%, implying that it has missed the Zacks Consensus
Estimate by the same magnitude.
The Zacks Consensus Estimates for full-year fiscal 2013 is $1.83,
implying an estimated year-over-year growth of 2.11%. The upside
potential for the third quarter and full year estimates,
essentially a proxy for future earnings surprises, is about 7.69%
and 10.19%, respectively.
Second Quarter Review
CarMax's profit remained flat year over year at $111.60 million
in the second quarter of fiscal 2013 as favorable impacts from
increased retail sales were offset by higher selling, general and
administrative (SG&A) costs associated with the company's
store expansion strategy. The company's net sales and operating
revenues for the quarter increased 6.6% to $2.76 billion in the
quarter, surpassing the Zacks Consensus Estimate of $2.74
Revenues from used vehicle sales improved 8.8% to $2.19 billion
on higher unit sales. Revenues from new vehicle sales escalated
31% to $61.40 million, owing to the same reason.
In the second quarter of fiscal 2013, the company has opened 3
used car superstores; 2 in Ft. Myers, Florida, and the other in
Nashville, Tennessee. It plans to open 10 superstores in fiscal
Estimate Revisions Trend
The Zacks Consensus Estimate for the third quarter increased
marginally by a penny over the past 30 days. Let us discuss the
agreement and magnitude of estimate revisions.
Agreement of Estimate Revisions
Over the last 30 days, 5 out of 13 analysts covering the stock
have revised the estimates for the third quarter upward while
none moved it downward. In the same period, 4 out of 13 analysts
covering the stock have revised the estimates upward for fiscal
2013 while one moved it downward. The upward pressure in
estimates can be attributable to better sales trend.
Magnitude of Estimate Revisions
The Zacks Consensus Estimate for both the third quarter and
fiscal 2013 increased by a penny to 39 cents and $1.83,
respectively, in the last month. Both the quarterly and annual
estimates reflect a year-over-year growth of 7.3% and 2.1%,
CarMax is one of the largest retailers of used vehicles. The
company pioneered the used car superstore concept with the
inauguration of its first store in 1993. It operated around 116
used car superstores in 58 markets as of December 6, 2012.
CarMax benefits from its focus in the used-vehicle market, which
will help it outgrow peers. Moreover, the inventories of the
company are closely aligned with sales trends, which optimize
gross profit per vehicle sold while offering great value to
customers. However, we are concerned about used vehicle margins
that are under pressure as manufacturers and dealers resort to
aggressive incentives in order to attract customers for trading
old cars for new ones.
CarMax, which competes with
Penske Automotive Group
), maintains a Zacks #3 Rank, which translates into a short-term
(1 to 3 months) Hold rating. Currently, we have a long-term (more
than 6 months) Neutral recommendation on its shares.
AUTONATION INC (AN): Free Stock Analysis
CARMAX GP (CC) (KMX): Free Stock Analysis
PENSKE AUTO GRP (PAG): Free Stock Analysis
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