CarMax, Inc. (NYSE: KMX)
CarMax Inc. Earnings Report
Before the market opened on Friday, CarMax Inc. (KMX) released earnings that sent the shares dumping in the premarket session. Analysts prior to the release had forecasted earnings of 68 cents on $3.6 billion in revenue but instead were met with 63 cents per share on $3.54 billion in revenue, a big miss needless to say. The company reported that new car sales has been great due to cheap fuel and great incentives but used cars, which declined this recent quarter, are weighing on earnings and affecting the bottom line. Keep an eye on this company as we could see further issues down the road as oil prices remain under pressure and money is cheap to burrow for new car loans.
CarMax’s CEO Comments
“We had a challenging sales quarter, which together with higher advertising expenses, contributed to the year-over-year decline in third-quarter net earnings,” said Chief Executive Tom Folliard. “ Here are some of the key highlights for the quarter. Used unit comps decreased by 0.8%, while total used units grew by 3.2%. Gross profit per unit of $2,160 was in line with gross profit per unit of $2,172 in the third quarter of last year. And total wholesale units grew 3.4%, about the same rate as total retail units. Gross profit per wholesale unit grew by $22 to $949 per car sold. CAF income also grew 3% to approximately $92 million.” (NASDAQ)
In the premarket sessions shares got rocked as disappointing earnings started to set in with lows hitting near $50 before bouncing up and opening the day at $53.44. Shares immediately sold off, reaching lows of $50.57 with a nice bounce back to VWAP where share prices consolidated and then made a nice move in the late afternoon before closing at $53.49. Shares finished the day down 6.4% as over 20 million shares traded hands. There looks to be a bit of resistance in the $53.50 area along with the $56 range. Support should be met at the big $50 mark followed by $48.41, the 200-day moving average on the weekly chart.
Looking at the bigger picture you can see that KMX has been on a bit of tailspin since reaching highs of $75.40 back in April. Just last month shares hit yearly lows of $53.46 with a minor bounce coming into the close of the year, however, after their latest earnings release this morning shares are plummeting and are looking to open around the low $50’s range which will set a yearly low. Shares are trading well below the 200-day moving average on the daily chart currently sitting at $64.23 and to top it off a Death Cross happened back in August. This chart looks very bearish to me before they even released earnings, but what I do like is that shares bounced off the big $50 level in the premarket session so now we will have to see how price action behaves throughout the day and over the next week. Currently, analysts have an average price estimate of $70.56, but it has met some resistance lately as RBC Capital and Wedbush Securities have both issued downgrades with price cuts going from $65 to $58 and $57 to $52 respectively.
CarMax, Inc. is as a holding company, which, through its subsidiaries, operates as a retailer of used vehicles and wholesale vehicle auction operator. The company operates in two segments: CarMax Sales Operations and CarMax Auto Finance. The CarMax Sales Operations segment consists of all aspects of the auto merchandising and service operations, excluding financing provided by CarMax Auto Finance. The CarMax Auto Finance segment provides vehicle financing through CarMax superstores. It also offers financing solely to customers purchasing vehicles at CarMax, and offers qualifying customers an array of competitive rates and terms, allowing them to choose the one that best fits their needs. The company was founded by Richard L. Sharp and William Austin Ligon in September 1993 and is headquartered in Richmond, VA. (MarketWatch)