Key Highlights
- Shares of CarMax gained approximately 3.5% during premarket hours following better-than-anticipated fiscal second quarter results.
- The company delivered adjusted EPS of $1.16, significantly surpassing the analyst consensus of 73 cents per share.
- Total revenue jumped 20% year-over-year to reach $7.9 billion, exceeding the FactSet consensus projection of $7.09 billion.
- Gross profit per used retail unit declined to $2,105, yet outperformed Wall Street’s forecast of $2,022.
- Management announced intentions to restart share repurchase activity at moderate levels during the fiscal third quarter.
CarMax stock advanced on Tuesday following the used vehicle retailer’s impressive fiscal second quarter performance. Shares gained 3.5% to reach $58.50 during premarket hours, extending what has been a year of strong outperformance relative to broader market indices.
For the quarter that concluded on August 31, the Richmond-based retailer delivered adjusted earnings of $1.16 per share. This represented a substantial increase from the 64 cents posted in the same period last year and crushed the 73 cent consensus forecast from Wall Street analysts.
Total revenue climbed 20% compared to the prior year period, reaching $7.9 billion. The figure handily exceeded the $7.09 billion consensus projection gathered by FactSet.
The company’s net income totaled $165.3 million for the quarter, representing a significant improvement from $95.4 million in the year-ago period. This translated to earnings of $1.16 per share, compared with 64 cents in the prior year quarter.
Unit Economics and Sales Volume Trends
The company reported gross profit of $2,105 per used retail vehicle, marking a decline from the $2,216 achieved in the comparable quarter last year. Despite this reduction, the metric exceeded the $2,022 that analysts had anticipated.
CarMax attributed the year-over-year decrease to deliberate pricing adjustments aimed at stimulating sales volume rather than maximizing per-unit profitability. The approach seems to be delivering results in terms of transaction growth.
Total used vehicle unit sales, encompassing both retail and wholesale channels, increased 15% to 387,735 units. Retail used vehicle units specifically grew 13.8% to reach 227,391.
Elevated interest rate levels and limited availability of lower-priced used vehicles have continued to constrain buyer demand. According to Cox Automotive data, vehicles in the sub-$15,000 price segment had only 29 days of supply, significantly below typical industry levels.
This inventory scarcity has created challenges for dealers attempting to serve budget-conscious consumers. CarMax has apparently navigated some of these headwinds by emphasizing volume growth over margin preservation.
Share Repurchase Program Resuming
The company did not execute any share repurchases during the second quarter. However, that approach is about to shift.
According to the earnings release, CarMax intends to restart its buyback program “at a modest level” when the fiscal third quarter begins. Management cited the strong second quarter results, sustained business momentum, and improved leverage ratios as justification for the decision.
Investor sentiment regarding CarMax’s recovery had been mixed, with debate over whether the turnaround was sustainable. Positive sentiment began building following the company’s fiscal first quarter report released in June.
The latest quarterly results reinforced that optimistic outlook. The decision to resume capital returns through buybacks served as an additional signal that leadership has confidence in the business trajectory.
Peer companies showed mixed performance on Tuesday. Carvana shares edged up 0.2%, AutoNation remained unchanged, while Group 1 Automotive gained 0.3%.
Since delivering its fiscal first quarter report on June 17, CarMax stock has appreciated 8.5%. Year-to-date, shares have soared 46%, substantially outperforming the S&P 500’s 12% advance during the same timeframe.
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