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CarMax (KMX) to Report Q2 Earnings: What's in the Cards?

CarMax Inc. KMX is slated to release second-quarter fiscal 2021 results on Sep 24, before the opening bell. The Zacks Consensus Estimate for the quarter’s earnings is pegged at 96 cents on revenues of $5.15 billion.

The used car dealership chain delivered better-than-expected results in the last reported quarter on higher-than-expected revenues from used vehicles.

Over the trailing four quarters, CarMax surpassed estimates on three occasions and missed in the other, the average surprise being 123.58%. This is depicted in the graph below:

 

CarMax, Inc. Price and EPS Surprise

CarMax, Inc. Price and EPS Surprise

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


Investors project an earnings beat for CarMax — peers of which include Advance Auto Parts AAP, O’Reilly Automotive ORLY and AutoZone AZO — this time as well. Reassuringly, our model also indicates the same.

 

Trend in Estimate Revision

The Zacks Consensus Estimate for CarMax’s fiscal second-quarter earnings per share has been revised upward by 1 cent in the past seven days. However, it compares unfavorably with the year-ago quarter’s earnings of $1.40 per share. The Zacks Consensus Estimate for quarterly revenues suggests year-over-year growth of 0.15%.

Earnings Whispers

Our proven model predicts an earnings beat for CarMax this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This has been elaborated below.

Earnings ESP: CarMax has an Earnings ESP of +9.8%. This is because the Most Accurate Estimate is pegged 9 cents higher than the Zacks Consensus Estimate. 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 of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Factors to Note

CarMax’s focus on the used vehicle market is likely to have boosted the company’s earnings in the quarter to be reported. Expensive new vehicles triggered solid demand for cheaply available used vehicles. This is anticipated to have buoyed the company’s top line. The Zacks Consensus Estimate for used-vehicles net sales, which have the highest contribution to its revenues, is pinned at $4,228 million, way higher than the $2,786 million recorded in the previous quarter. The Zacks Consensus Estimate for the quarterly gross profit from the used-vehicle segment is pegged at $431 million, indicating a rise from the $262 million reported in the last quarter.

The firm’s continued efforts in modernizing its wholesale auction platforms are likely to have aided the company during the quarter under review. The Zacks Consensus Estimate for quarterly net sales of wholesale vehicles is pegged at $638 million, up from the prior quarter’s $343 million. Further, the consensus estimate for revenues from other segments stands at $162 million, calling for a rise from the $100 million recorded in first-quarter fiscal 2021.

CarMax’s omni-channel efforts to optimize customer shopping experience are likely to have supported the top line in the to-be-reported quarter. The firm’s efforts to boost its online shopping capabilities as well as amenities like ship-to-home next day, buy online, pick-up in stores and commercial customer ordering are likely to have bolstered its margins during the period under discussion.
 
With the coronavirus pandemic rattling the auto industry, the auto retailer has also implemented a series of cost-saving initiatives throughout the enterprise, including substantial staffing adjustments, furloughs, compensation cuts, reducing inventory levels and slashing marketing spend. Such cost-containment efforts are anticipated to have boosted the company’s profits.

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OReilly Automotive, Inc. (ORLY): Free Stock Analysis Report

Advance Auto Parts, Inc. (AAP): Free Stock Analysis Report

AutoZone, Inc. (AZO): Free Stock Analysis Report

CarMax, Inc. (KMX): 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.

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