CarMax Hits New 52-Week High - Analyst Blog

Shares of CarMax Inc. ( KMX ) hit a new 52-week high of $42.45 on Apr 3, which is above its previous level of $41.94 on Mar 15. Shares of the company started escalating buoyed up by its impressive third fiscal quarter results, aggressive store expansion strategy, fast recovery in the auto industry and recent extension of its share buyback program.

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 117 used car superstores in 58 markets as of December 20, 2012. It has a market cap of $9.4 billion.

CarMax benefits from its focus on the used-vehicle market, which will help outgrow peers. Moreover, the company's inventories are closely aligned with sales trends, which optimize gross profit per vehicle sold while offering great value to customers. Currently, it retains a Zacks Rank #3 (Hold).

CarMax reported a 13.9% rise in earnings per share to $0.41 in the third quarter of fiscal 2013 ended on November 30, 2012 from $0.36 in the year-ago quarter. Earnings surpassed the Zacks Consensus Estimate of $0.39 per share.

The company's net sales and operating revenues for the quarter climbed 15.1% to $2.6 billion from $2.3 billion in the third quarter of fiscal 2012. Revenues also beat the Zacks Consensus Estimate of $2.5 billion.

In the first nine months of fiscal 2013, the company opened 8 superstores. The company plans to open 10 superstores in fiscal 2013.

In February this year, the Board of Directors of CarMax approved an extension of its existing share repurchase program to $500 million from $300 million due to its confidence in the business and ability to deliver its growth objectives. The extended authorization will expire on Dec 31, 2014.

On Oct 17, 2012, CarMax' board authorized the repurchase of up to $300 million of its common stock, which was supposed to expire on Dec 31, 2013. As of Nov 30, 2012, the company had repurchased 1.7 million shares of its common stock for an average price of $34.53, leaving $239.8 million available for repurchase.

Auto sales in the U.S. rose by 3.4% year-over-year to 1.45 million vehicles in March, the best monthly sales in almost six years. This translated into a seasonally adjusted rate (SAAR) of 15.27 million units for the year, up about 8.0% from 14.14 million units in the same month of 2012. Better construction market, cheap financing, strong pent-up demand and improving consumer confidence continue to fuel sales growth.

All the six major automakers posted a single-digit rise in sales during the month. Among them, Honda Motor Co. ( HMC ) topped in terms of sales growth followed by General Motors Company ( GM ).

While we remain on the sidelines about CarMax, a stock in the auto retailers industry that is currently performing well is O'Reilly Automotive Inc. ( ORLY ) with a Zacks Rank #2 (Buy).

GENERAL MOTORS (GM): Free Stock Analysis Report

HONDA MOTOR (HMC): Free Stock Analysis Report

CARMAX GP (CC) (KMX): Free Stock Analysis Report

O REILLY AUTO (ORLY): Free Stock Analysis Report

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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.

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