On Mar 3, 2014, we issued an updated research report on
). The company reported positive earnings surprises in two of the
trailing four quarters, with an average beat of 6.32%.
CarMax posted earnings per share of 47 cents in the third
quarter of fiscal 2014 (ended Nov 30, 2013), increasing 14.6%
from 41 cents a year ago. Reported earnings missed the Zacks
Consensus Estimate by 1 cent. Net earnings increased 12.4% to
$106.5 million from $94.7 million a year ago.
Together, net sales and operating revenues in the quarter rose
13% to $2.9 billion, missing the Zacks Consensus Estimate of $3.1
billion. The year-over-year improvement in revenues was mainly
due to increases in used vehicle sales and new vehicle sales.
Unlike its peers, CarMax focuses more on the used-car market,
which helps it to outperform the industry. The company follows a
strong capital deployment strategy via share buyback to boost
shareholder value. Moreover, the aggressive store expansion
strategy is raising revenues.
However, CarMax is incurring high cash outflow from operating
activities. Moreover, 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
forcing CarMax to lower the prices of vehicles in order to reduce
high used-car inventory, thereby shrinking margins.
CarMax currently carries a Zacks Ranks #2 (Buy).
Stocks That Warrant a Look
Other stocks worth considering in the auto industry include
Advance Auto Parts Inc.
O'Reilly Automotive Inc.
). While Advance Auto Parts currently carries a Zacks Rank #1
(Strong Buy), AutoZone and O'Reilly hold a Zacks Rank #2.
ADVANCE AUTO PT (AAP): Free Stock Analysis
AUTOZONE INC (AZO): Free Stock Analysis
CARMAX GP (CC) (KMX): Free Stock Analysis
O REILLY AUTO (ORLY): Free Stock Analysis
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