Quick Overview
- Shares of CarMax gained approximately 3.5% during premarket hours following a fiscal Q2 earnings report that exceeded analyst projections.
- The company delivered adjusted EPS of $1.16, significantly surpassing the consensus estimate of 73 cents per share.
- Total revenue jumped 20% year-over-year to reach $7.9 billion, outperforming the FactSet consensus of $7.09 billion.
- While gross profit per used retail unit declined to $2,105, it still exceeded analyst expectations of $2,022.
- The used car retailer announced plans to restart its share repurchase program at a measured pace during fiscal Q3.
CarMax stock advanced on Tuesday following the used vehicle dealer’s fiscal second quarter report that surpassed Wall Street expectations. Shares jumped 3.5% to reach $58.50 during premarket hours, extending gains that have already eclipsed the broader market’s performance this year.
For the quarter that concluded on August 31, the Richmond-based retailer delivered adjusted earnings of $1.16 per share. This marked a substantial improvement from the 64 cents recorded in the same period last year and comfortably exceeded the analyst consensus of 73 cents.
Total revenue climbed 20% compared to the prior year period, reaching $7.9 billion. The figure topped the $7.09 billion consensus forecast gathered by FactSet.
The company recorded net income of $165.3 million during the quarter, a notable increase from the $95.4 million posted one year earlier. Calculated on a per-share basis, this translated to $1.16 compared with 64 cents in the year-ago period.
Unit Economics and Sales Volume
The retailer reported gross profit of $2,105 per used retail vehicle, representing a decline from the $2,216 recorded in the comparable quarter last year. Despite the year-over-year decrease, the metric exceeded Wall Street’s projection of $2,022.
CarMax attributed the reduction to deliberate pricing adjustments aimed at driving unit sales volume rather than maximizing per-vehicle profitability. This approach appears to be generating the intended results.
Total used vehicle unit sales, combining both retail and wholesale channels, increased 15% to 387,735 units. Retail used vehicle units specifically rose 13.8% to 227,391.
Elevated borrowing costs and limited inventory of affordable pre-owned vehicles have continued to constrain buyer activity. According to Cox Automotive data, vehicles with sticker prices below $15,000 had merely 29 days of available supply, significantly below typical industry levels.
This inventory constraint has created challenges for dealers attempting to serve budget-conscious consumers. CarMax has apparently mitigated some of this headwind by emphasizing unit volume over margin preservation.
Share Repurchase Program Returns
The company did not execute any share repurchases during the recently completed quarter. However, that approach is about to shift.
Management disclosed in its earnings release that it intends to reinitiate share buybacks “at a modest level” when fiscal Q3 begins. The decision reflects confidence stemming from the second quarter’s performance, sustained business momentum, and enhanced leverage metrics.
Opinions among analysts had been mixed regarding whether CarMax’s operational turnaround represented sustainable progress. Sentiment began improving following the company’s fiscal first quarter report released in June.
Tuesday’s results reinforced that constructive narrative. The decision to resume capital returns was interpreted as additional evidence that leadership maintains conviction about the business trajectory.
Industry peers showed varied price action on the day. Carvana edged up 0.2%, AutoNation remained unchanged, while Group 1 Automotive gained 0.3%.
Since reporting fiscal first quarter earnings on June 17, CarMax stock has risen 8.5%. Year-to-date, shares have surged 46%, substantially outperforming the S&P 500’s 12% advance during the same timeframe.
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