CarMax (KMX), the largest used car retailer in the U.S., just released robust second-quarter earnings and there’s plenty to talk about. The company reported total revenues of $7.1 billion, beating the analysts’ consensus estimate of $6.8 billion and reflecting steady growth in a challenging market. Retail used vehicle sales were a particular bright spot, increasing by 5.1% from the same period last year, with 211,020 vehicles sold. Although wholesale unit sales dropped slightly by 0.3%, retail growth remained a key driver, even as average retail prices slipped by 4.6%, or about $1,250 per vehicle.
Using TipRanks’ Revenue Breakdown tool, you can see that CarMax’s revenue is primarily driven by used vehicle sales, which account for a substantial 78.84%. Wholesale vehicle sales follow at 18.75%, while other revenue sources make up a smaller 2.40%.
“We grew retail used unit sales, delivered strong margins, and managed through industry-wide auto loan loss pressure,” said CEO Bill Nash, emphasizing CarMax’s ability to stay competitive despite market challenges.
KMX’s EPS Beats Expectations
Transitioning to earnings per share (EPS), CarMax reported an EPS of $0.85, a 13.3% increase from the $0.75 reported a year ago, in line with analysts’ consensus estimate of $0.85. This uptick from the previous year shows that CarMax is effectively managing its expenses and finding ways to deliver value to shareholders despite market challenges. The increase came largely from improved margins and cost management efforts, which Nash praised for keeping the company on solid ground.
CarMax Auto Finance Faces Headwinds
CarMax Auto Finance (CAF), which provides financing for many of CarMax’s customers, had a tougher quarter. CAF income decreased by 14.4%, primarily due to an increase in provisions for loan losses, a problem that’s been affecting the industry at large. CarMax increased its estimate for lifetime loan losses by $52.2 million, reflecting the industry’s rising default rates. Even with this challenge, CAF’s net interest margin percentage held steady at 6.1%.
CarMax Boosts Share Repurchases
In Q2, CarMax repurchased $106.1 million worth of its own stock, further signaling confidence in its long-term prospects. The repurchase program, which has been consistently executed over the past several years, is part of the company’s ongoing effort to return value to shareholders. With $2.15 billion still available for future buybacks, CarMax continues to bet on itself despite the bumps in the road.
Is KMX Stock a Good Buy?
Analysts remain cautiously optimistic about KMX stock, with a Moderate Buy consensus rating based on six Buys, four Holds, and one Sell. Year-to-date, KMX has declined by more than 4%, and the average KMX price target of $79.86 implies an upside potential of 7.21% from current levels. These analyst ratings are likely to change following KMX’s Q2 results today.
