Markets
OSK

CarMax Grows on Store Expansion, Rising SG&A Expenses a Woe

Various market performance charts

On Jan 15, we issued an updated research report on CarMax, Inc.KMX .

On Dec 21, CarMax reported earnings per share of 81 cents for third-quarter fiscal 2018 (ended Nov 30, 2017), missing the Zacks Consensus Estimate by one cent. During the quarter, its net sales and operating revenues rose 11% year over year to $4.11 billion. The top line surpassed the Zacks Consensus Estimate of $4 billion.

The company has been expanding its footprint through aggressive store launch initiatives. During the third quarter, it opened five stores, one each in Philadelphia, Las Vegas, San Francisco and Seattle. The fifth outlet was opened in Tyler, TX, which is a new television market. These store openings, leading to a rise in customer footfall, help the company drive its revenue growth.

CarMax Inc Price and Consensus

CarMax Inc price-consensus-chart | CarMax Inc Quote

CarMax also engages in frequent share repurchase programs to enhance shareholder value. During third-quarter fiscal 2018, the company spent $107.2 million to repurchase 1.5 million shares. Also, at the end of the reported quarter, the company had worth $1.14 billion of authorization left under its current share repurchase program.

Moreover, the stock has seen the Zacks Consensus Estimate for fourth-quarter fiscal 2018 earnings being revised 2.2% upward over the last 30 days.

However, due to regular store unveilings, CarMax's SG&A expenses have escalated 12% to $399.7 million during the quarter. Other factors contributing to this expenditure rise include higher stock-based compensation and incentive pay accruals. Also, higher expenses are hampering the company's gross margin figure.

Additionally, CarMax is open to instability in used car prices, which might hurt its revenue generation.

Price Performance

Shares of CarMax have gained 8.8% over a year, outperforming the 8.3% decline of the industry it belongs to.

Zacks Rank & Key Picks

CarMax has a Zacks Rank #3 (Hold). A few better-ranked stocks in the auto space are Wabco Holdings Inc. WBC , Lear Corporation LEA and Oshkosh Corporation OSK , all carrying a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Wabco has an expected long-term growth rate of 15%. Over a month, shares of the company have climbed 9.1%.

Lear has an expected long-term growth rate of 7.1%. In the last three months, shares of the company have gained 9.3%.

Oshkosh has an expected long-term growth rate of 16.5%. Shares of the company have surged 34.9% in the last six months.

Today's Stocks from Zacks' Hottest Strategies

It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.

And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.

See Them Free>>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

CarMax Inc (KMX): Free Stock Analysis Report

Lear Corporation (LEA): Free Stock Analysis Report

Oshkosh Corporation (OSK): Free Stock Analysis Report

Wabco Holdings Inc. (WBC): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

OSK LEA WBC KMX

Other Topics

Stocks

Latest Markets Videos