CarMax, Inc. (NYSE: KMX)
Shares of the United States’ largest used-car retailer, CarMax, fell sharply in early trading on Tuesday and were down as much as 9.5% from Monday’s close, after reporting mix second quarter results. Shares of KMX traded down to a low of $56.68 and closed higher to $59.72 on over three times the average daily volume.
CarMax Earnings and Outlook
CarMax report a beat in earnings of 82 vs. 76 cents per share, which was 17% better than a year ago, however their revenue of 3.88 billion came in shy of expectations of 3.96 billion. The majority (80%)of their revenue comes from used car sells, which grew 9.2% year over year while about 15% of revenue comes from wholesale vehicle sales, which also grew 8.7% year over year. However, revenue was hurt by new car sales, which fell 13.5%. Additionally, the average selling price for a used car was down 1.1% to $19,983, and the average selling price for a new car was also down 0.7% to $26,799.
So why are investors selling KMX shares? Avoiding the obvious of a miss in revenue and a downturn in the overall market, analysts were quick to point out that we are at a time of the year where used car sales begin to slow.
Jonathan Banks, executive at the Used Car Guide division of J.D. Power said,
“To give you an idea of what the market holds the remainder of 2015, we’re at the time of the year where wholesale used vehicle sales begin to slow. Spring and summer historically see a rise in sales as there are several sales-focused holiday weekends, along with a rush of college age drivers in need of reliable transportation before heading to school in the fall.” PR Newswire
CarMax also reported in their earning conference call that they opened up four new stores at the end of the second quarter and plan to open up eight new locations. Currently, CarMax has 153 stores. Additionally, it has 2 billion remaining from its repurchase program.
CarMax CEO Comments
“We are pleased to report record second quarter results. The continued expansion of our store base and growth across our used, wholesale and CAF operations, as well as our share repurchase program, all contributed to our record second quarter earnings per share.” Earningscast
KMX has been in sideways consolidation since late August, which broke the downtrend in the stock from the low $70’s back in July. While it’s considerably down from its yearly high of $75.4 back in April, most analysts have a consensus price target of $75.27.
CarMax, Inc. Company Profile
CarMax, Inc. is a holding company engaged in providing used vehicles and related products and services. The Company operates through two business segments: CarMax Sales Operations and CarMax Auto Finance (CAF). The Company’s CarMax Sales Operations segment consists of all aspects of its auto merchandising and service operations, excluding financing provided by CAF. The CarMax Sales Operations segment sells used vehicles, purchases used vehicles from customers and other sources, sells related products and services, and arranges financing options for customers. The Company’s CAF segment consists of its own finance operation that provides vehicle financing through CarMax stores. The CAF products and services include retail merchandising, wholesale auctions, extended protection plans (EPPs), reconditioning and service, and customer credit. Yahoo Finance