CarMax (KMX) to Release Q1 Earnings: Is a Beat in Store?

CarMax Inc. KMX is set to release first-quarter fiscal 2020 results on Jun 21, before market open. In the last reported quarter, the company delivered earnings beat of 8.7%. The company’s earnings surpassed estimates in all the trailing four quarters, the average being 7%.

In the past three months, shares of CarMax have outperformed the industry it belongs to. The stock has rallied 38.6% compared with the industry’s rise of 10%.

Let’s see how things are shaping up for the upcoming announcement.

CarMax, Inc. Price and EPS Surprise


CarMax, Inc. Price and EPS Surprise



CarMax, Inc. price-eps-surprise | CarMax, Inc. Quote

Why a Positive Surprise is Likely in The Quarter

Our proven model suggests that CarMax is likely to beat estimates in this quarter. This is because a stock needs to have the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for increasing the odds of an earnings beat.

Earnings ESP: CarMax has an Earnings ESP of +4.35% as the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at $1.55 and $1.49, respectively. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: CarMax currently carries a Zacks Rank #3.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

What’s Driving Better-Than-Expected Earnings?

CarMax pursues an aggressive store-expansion initiative. In fourth-quarter fiscal 2019, CarMax opened five stores, which includes three in new markets that comprise Buffalo, NY, Montgomery, AL and New Orleans, LA. During the fiscal year, it opened 15 stores, taking total used-car store count to 203 as of Feb 28, 2019. For the current quarter, it plans to open three stores in existing markets. Additionally, the company is making improvements to its digital platform to increase website traffic. All these initiatives are likely to have a positive influence on the company’s sales in the soon-to-be-released quarter.

The Zacks Consensus Estimate for net sales of wholesale vehicles is pegged at $652 million for the quarter to be reported. In fourth-quarter fiscal 2019, net sales of wholesale vehicles were $544 million.

In the used-vehicle retail, the Zacks Consensus Estimate for net sales is pegged at $4.43 billion. In the last reported quarter, the company generated net sales of $3.63 billion.

The Zacks Consensus Estimate for sales in the Other segment is pegged at $168 million, whereas the company recorded $146 million in the last reported quarter.

Peer Releases

On Apr 30, Standard Motor Products Inc. SMP announced first-quarter fiscal 2019 earnings. In the reported quarter, the company posted earnings per share (EPS) of 57 cents that missed the Zacks Consensus Estimate of 63 cents. Its total revenues amounted to $283.8 million, which surpassed the Zacks Consensus Estimate of $280 million. The company currently carries a Zacks Rank of 3.

On Apr 30, Cummins Inc. CMI announced first-quarter 2019 earnings. The company posted EPS of $4.20 and generated revenues of $6 billion. Its quarterly numbers beat their respective Zacks Consensus Estimate. The company currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

On May 9, Westport Fuel Systems Inc. WPRT announced first-quarter 2019 results. In the quarter, the company’s net loss from continuing operations was 2 cents per share, narrower than the Zacks Consensus Estimate of a loss of 5 cents. Also, its revenues surpassed estimates. The company currently carries a Zacks Rank # 2.

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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.

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