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CarMax's Q3 Earnings & Revenues Miss Estimates, Rise Y/Y

CarMax Inc.KMX posted earnings per share of 63 cents in the third quarter of fiscal 2016, ended Nov 30, 2015, registering an increase of 5% from 60 cents earned a year ago. However, earnings missed the Zacks Consensus Estimate of 68 cents. The improvement in the bottom line was driven by lower shares outstanding, which offset the 1.4% decline in net income to $128.2 million.

Net sales and operating revenues in the reported quarter increased 4.1% year over year to $3.54 billion, but fell short of the Zacks Consensus Estimate of $3.62 billion. The year-over-year rise was mainly driven by increased used vehicle and wholesale vehicle sales.

Used vehicle revenues appreciated 4.1% to $2.9 billion in the quarter, aided by higher unit sales. Unit sales of used vehicles increased 3.2% to 143,673 vehicles, while the average selling price improved 0.9% to $20,094. Comparable-store used vehicle unit sales dipped 0.8% in the quarter due to lower store traffic.

New vehicle revenues decreased 22.5% to $42.3 million owing to a 21.6% decline in unit sales to 1,576 vehicles. Also, the average selling price of new vehicles dropped 1.2% to $26,720.

Wholesale vehicle revenues rose 6.7% to $513.8 million in the quarter on unit sales increase of 3.4% to 94,066 vehicles. Wholesale unit sales benefited from an improvement in store base. Average selling price of wholesale vehicles went up 2.3% to $5,243.

Other sales and revenues climbed 6.1% to $79 million. Extended protection plan ("EPP") revenues dropped 0.1% to $61.6 million.

Gross profit improved 4% to $464.3 million from $446.6 million in the year-ago quarter.

CarMax Auto Finance (CAF)

CAF reported a 2.9% increase in income to $92.3 million in third-quarter fiscal 2016 from $89.7 million a year ago. The improvement was primarily driven by an increase in average managed receivables, partially offset by lower interest margin and a rise in the provision for loan losses.

Store Openings

During the third quarter of fiscal 2016, CarMax opened 2 stores and relocated 1 store. Subsequent to the end of the quarter, the company entered the Boston market with two stores. As of Nov 30, 2015, CarMax had 155 used car stores.

In fiscal 2016, the company plans to open 14 stores and relocate 1 store whose lease is about to expire. The company also intends to open 13-16 superstores in each of the next two fiscal years.

Share Repurchase Program

During the quarter under review, CarMax spent $445.7 million to repurchase 7.7 million shares under its existing share repurchase program. As of Nov 30, 2015, the company had $1.55 billion of authorization remaining under its share repurchase program.

Financial Position

CarMax had cash and cash equivalents of $33.3 million as of Nov 30, 2015, down from $189.9 million as of Nov 30, 2014. Total debt rose to $864 million as of Nov 30, 2015, from $302.6 million as of Nov 30, 2014.

In the first nine months of fiscal 2016, CarMax had a cash outflow of $381.6 million from operations, compared with $784.6 million in the prior-year period. Capital expenditures totaled $240.8 million in the first nine months, up from $238.9 million a year ago. Meanwhile, the company projects capital expenditures of around $360 million for fiscal 2016.

Zacks Rank

CarMax currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the same industry include General Motors Co. GM , O'Reilly Automotive Inc. ORLY and U.S. Auto Parts Network, Inc. PRTS . General Motors sports a Zacks Rank #1 (Strong Buy), while O'Reilly and U.S. Auto Parts carry a Zacks Rank #2 (Buy).

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O REILLY AUTO (ORLY): Free Stock Analysis Report

GENERAL MOTORS (GM): Free Stock Analysis Report

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

US AUTO PARTS (PRTS): 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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