SummaryCarMax is executing a turnaround, with comps and EPS beating expectations despite layoffs and a challenging used car market.KMX's profit growth is increasingly driven by financing and warranties, not just car sales, with $806 per car in extras and loan income up 32%.The 'Shift into GEAR' strategy emphasizes cost-cutting ($200M annual savings), competitive pricing, and value-added services, restoring sales momentum and profitability.Analyst targets lag recent performance; if current growth persists, further upward revisions and stock upside are likely, with technicals suggesting $72 as a near-term target.Editor's note: Seeking Alpha is proud to welcome Next Trade as a new contributing analyst. You can become one too! Share your best investment idea by submitting your article for review to our editors. Get published, earn money, and unlock exclusive SA Premium access.
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$30.26▼
$65.2825.80
$57.85
CarMax Inc. NYSE: KMX operates in the used-car retail industry, where affordability pressures and elevated borrowing costs have weighed on consumers.
But the company recently received a bullish double upgrade from Bank of America, raising the possibility that its midyear rally could rev up again.
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That’s a meaningful change in tone. Wall Street has largely treated the used car giant as a show-me story, with analysts waiting for proof that its omnichannel strategy could deliver consistent unit growth and better margins.
A double upgrade, which skips over a neutral rating entirely, signals that at least one major firm believes CarMax is making enough progress to justify a more bullish outlook.
CarMax Is Benefiting From an FTC PolicyThe catalyst for CarMax comes down to transparency. In March, the Federal Trade Commission (FTC) warned 97 auto dealership groups about deceptive pricing practices, followed by additional guidance in September. For years, CarMax has been disadvantaged by posting an "all-in" price that was, on paper, higher than prices some competitors advertised without including mandatory fees.
But those additional fees could appear later in the buying process. Now the FTC is requiring dealers to list their all-in prices, which works to CarMax's advantage.
In other words, shoppers comparing listings online were often making an apples-to-oranges comparison. A competitor’s lower sticker price could look like the better deal until documentation fees, reconditioning charges, and other add-ons appeared at the closing table. CarMax’s no-haggle pricing, long one of its key brand differentiators, was being penalized for the very thing that made it consumer-friendly.
Used Car Market Tailwinds Are Hard to IgnoreIt's a real story, but it's not new. So why now? The used car market has shown resilience in 2026, supported by demand from budget-conscious buyers. The same pressures that have impacted new car prices (tariffs, inflation, etc.) are making used vehicles more appealing. The gap between new and used cars is approximately $16,000, the widest it has ever been.
That gap pushes budget-conscious buyers who might otherwise have purchased a new vehicle into the used market. As the nation’s largest used car retailer, CarMax is well-positioned to capture a large share of that demand.
Plus, according to Mordor Intelligence, the U.S. used car market is valued at approximately $871 billion and could reach $980 billion by 2031. Even modest market share gains in a market that size can translate into significant revenue growth for a company with CarMax’s scale.
Second-Quarter Results Show the Thesis Is WorkingCarMax's fiscal 2027 (FY2027) second-quarter earnings report provided encouraging evidence of its turnaround. The company reported revenue of $7.88 billion, which was up 19.5% year over year (YOY).
The earnings story was even stronger. CarMax delivered diluted earnings per share (EPS) of $1.16. That beat expectations by approximately 59% and came in over 81% higher YOY.
Investors should also keep an eye on CarMax Auto Finance (CAF), the company’s in-house lending arm. CAF contributes a meaningful share of CarMax’s profits, and its provision for loan losses offers a window into the financial health of the company’s customers. If credit quality holds up as more buyers shift to used vehicles, that would ease one of the risks that has weighed on the stock.
The company is expected to report Q3 FY2027 earnings on Dec. 17. Before then, CarMax will host a strategic update on Nov. 3, which Bank of America highlighted as a near-term catalyst. But for long-term investors, this may be a time to look at buying KMX on weakness. Between now and the next earnings report, the stock is likely to trade on broader sentiment toward consumer spending and interest rates, as well as management's strategic outlook, creating entry points for patient investors.
Is KMX Ready for a Second Act?It's not like investors ignored the FTC action. The KMX share price is up around 35% year-to-date. However, that includes a drop of over 17% since hitting its 52-week high in August.
The question for investors is whether they are losing confidence in the stock or if this is just a healthy pullback. The technicals signal more of the latter. The relative strength index (RSI) hit an oversold level near 29 on Oct. 14, and investors rushed in to provide support.
The rebound confirms support at a level the stock reached in June. That was also a level that acted as resistance at two other points in 2026. When former resistance becomes support, technical analysts generally read it as a sign that buyers are willing to defend that price, which can set the stage for the next leg higher.
Some analysts are coming around to the current price action. The CarMax analyst forecasts on MarketBeat have 19 analysts giving KMX a consensus Hold rating with a price target of $57.85.
In addition to Bank of America's Oct. 15 double upgrade from Underperform to Buy, which included a price-target increase from $50 to $65, UBS Group set a $65 price target on CarMax.
Consensus price targets also tend to lag fresh upgrades. If more analysts follow Bank of America’s lead, the consensus target could move higher in the coming weeks.
Should You Invest $1,000 in CarMax Right Now?Before you consider CarMax, you'll want to hear this.
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Bank of America zvýšila doporučení pro CarMax na „koupit“ a cílovou cenu z 50 USD na 65 USD; srovnatelné prodeje ojetých vozů ve druhém čtvrtletí vzrostly o 13 %.
Bank of America has upgraded CarMax Inc (NYSE:KMX), the US used-car retailer, to 'buy' from 'underperform' and raised its price target to $65 from $50 as improving price competitiveness drives market share gains.
The bank expects enforcement of the Federal Trade Commission’s (FTC) price-transparency rules, alongside CarMax’s own pricing changes, to support sales growth beyond the initial regulatory boost.
CarMax’s comparable used-vehicle sales rose 13% in its second financial quarter, while the wider industry declined 2%, highlighting the company’s recent outperformance.
Bank of America said the FTC’s campaign, which began in May, should benefit CarMax as dealers face greater pressure to advertise prices that include previously undisclosed fees.
CarMax removed its processing fees in May, and the bank estimates that regulatory changes accounted for half of the improvement in its price competitiveness.
The broker expects the benefits to last as more dealers comply with the rules and customers develop greater trust in CarMax’s advertised prices, potentially encouraging repeat purchases.
Bank of America also sees scope for CarMax to reduce prices further through cost savings in vehicle reconditioning and logistics, allowing it to attract more buyers without reducing gross profit per vehicle.
The company has introduced a centralised parts selection tool, shortened its warranty period to 30 days and reduced transfers across the roughly 2 million to 2.5 million vehicles it handles annually.
A review of nearly 500 advertised listings for six popular 2023 vehicle models found CarMax’s prices were 0.3% above the market average, compared with 1.2% below average at online rival Carvana and 0.1% below average at franchised dealers.
Bank of America believes cost reductions could give CarMax room to become more price-competitive while maintaining gross profit per vehicle.
The broker also highlighted an opportunity from consumers trading down from new vehicles as affordability pressures persist, with the average new-vehicle transaction price reaching about $50,600 in September.
Higher-income buyers and demand for vehicles aged zero to three years helped lift CarMax’s average selling price rose by 6% through changes in the sales mix during the second quarter, while its pricing strategy kept sales to lower-income households stable.
Bank of America identified CarMax’s planned November 3 strategic update as a near-term catalyst, with investors expected to look for cost initiatives that can sustain comparable sales growth as the initial pricing and regulatory benefits fade.
Shares of CarMax were trading over 4% higher on Thursday at around $51.85.
CarMax, Inc. (NYSE:KMX – Get Free Report)’s stock price was down 4.2% during trading on Wednesday. The company traded as low as $56.25 and last traded at $56.7640. 720,608 shares traded hands during trading, a decline of 77% from the average session volume of 3,151,084 shares. The stock had previously closed at $59.23.
Key Headlines Impacting CarMax Here are the key news stories impacting CarMax this week:
Positive Sentiment: CarMax reported fiscal Q2 revenue of $7.88 billion, up 19.5% year over year, while adjusted earnings of $1.16 per share exceeded the $0.73 consensus estimate. Used-vehicle unit sales rose sharply, indicating that competitive pricing is driving demand. CarMax Q2 Earnings Beat Estimates Positive Sentiment: Several analysts raised their price targets following the earnings beat. Robert W. Baird lifted its target to $70 and maintained an outperform rating, while RBC raised its target to $56 with a sector-perform rating. CarMax Analysts Boost Their Forecasts Positive Sentiment: Management signaled a potential resumption of share repurchases and is targeting approximately $200 million in fiscal 2027 exit-rate cost savings, supporting the company’s broader “Shift into GEAR” turnaround plan. CarMax will provide a strategic update on November 3. CarMax Signals Resumption of Share Repurchases Neutral Sentiment: Zacks characterized KMX as a strong value stock, which may attract valuation-focused investors, although the stock remains subject to broader consumer-spending and used-car-market conditions. Why CarMax Is a Strong Value Stock Negative Sentiment: Investors are also focusing on weaker margins: retail gross profit per used vehicle fell $111 to $2,105, and wholesale gross profit per unit declined $135 to $858. Management expects CarMax Auto Finance income to be slightly lower in fiscal 2027, raising questions about earnings durability. CarMax Margin Pressure Analysis Negative Sentiment: Analyst opinion remains divided. BNP Paribas Exane reaffirmed a strong-sell rating with a $48 target, while other estimates remain below the current trading level, indicating continued concerns about valuation and profitability. Analysts Set New Price Targets KMX has been the subject of several research analyst reports. Stephens increased their target price on CarMax from $66.00 to $74.00 and gave the stock an “overweight” rating in a research report on Friday, September 25th. UBS Group boosted their price target on CarMax from $57.00 to $62.00 and gave the stock a “neutral” rating in a report on Wednesday. Truist Financial upped their price target on CarMax from $50.00 to $60.00 and gave the stock a “hold” rating in a research note on Wednesday. Wall Street Zen raised shares of CarMax from a “sell” rating to a “hold” rating in a report on Saturday, June 13th. Finally, BNP Paribas Exane reiterated a “strong sell” rating and set a $48.00 price objective (up from $33.00) on shares of CarMax in a research report on Wednesday. Two investment analysts have rated the stock with a Buy rating, fourteen have issued a Hold rating and three have assigned a Sell rating to the company. According to data from MarketBeat.com, the company presently has a consensus rating of “Reduce” and a consensus target price of $56.71.
Check Out Our Latest Stock Report on CarMax CarMax Stock Up 1.5% The company’s 50-day simple moving average is $59.47 and its 200 day simple moving average is $50.40. The company has a debt-to-equity ratio of 2.66, a current ratio of 2.33 and a quick ratio of 0.82. The firm has a market cap of $7.94 billion, a P/E ratio of 27.29, a price-to-earnings-growth ratio of 1.75 and a beta of 1.23.
CarMax (NYSE:KMX – Get Free Report) last issued its quarterly earnings data on Tuesday, September 29th. The company reported $1.16 earnings per share for the quarter, topping the consensus estimate of $0.73 by $0.43. The company had revenue of $7.88 billion for the quarter, compared to analysts’ expectations of $7.09 billion. CarMax had a return on equity of 7.76% and a net margin of 1.06%.The firm’s revenue for the quarter was up 19.5% on a year-over-year basis. During the same period in the previous year, the firm posted $0.64 earnings per share. Research analysts anticipate that CarMax, Inc. will post 2.74 EPS for the current fiscal year.
Institutional Inflows and Outflows Several hedge funds and other institutional investors have recently bought and sold shares of KMX. State Street Corp lifted its holdings in shares of CarMax by 5.6% in the 2nd quarter. State Street Corp now owns 5,156,276 shares of the company’s stock worth $272,715,000 after buying an additional 271,216 shares during the period. Jupiter Topco LLC purchased a new position in shares of CarMax during the second quarter valued at $245,676,000. Janus Henderson Group PLC raised its holdings in shares of CarMax by 1.1% in the first quarter. Janus Henderson Group PLC now owns 4,580,807 shares of the company’s stock valued at $190,471,000 after acquiring an additional 49,987 shares in the last quarter. Primecap Management Co. CA bought a new stake in shares of CarMax in the second quarter valued at about $230,548,000. Finally, Dimensional Fund Advisors LP lifted its stake in CarMax by 7.3% in the first quarter. Dimensional Fund Advisors LP now owns 4,275,663 shares of the company’s stock worth $177,767,000 after acquiring an additional 289,768 shares during the period.
CarMax Company Profile (Get Free Report)
CarMax, Inc is a retailer of used vehicles operating in the United States. The company sells a broad selection of used cars, trucks and SUVs through its dealership network and online platform, offering customers the ability to research, purchase and arrange delivery for vehicles through an omnichannel shopping experience.
In addition to retail vehicle sales, CarMax provides vehicle financing through CarMax Auto Finance and offers customers access to extended protection products and related services.
Further Reading Five stocks we like better than CarMax Everyone in AI Is Quietly Copying Palantir’s Playbook Advanced Micro Devices Is Spending $8.2 Billion to Learn What AI Needs Next JPMorgan Bets on Genius Sports as the Market Loses Patience Apple’s $5.7 Billion Patent Verdict Raises a Bigger Royalty Question Receive News & Ratings for CarMax Daily - Enter your email address below to receive a concise daily summary of the latest news and analysts' ratings for CarMax and related companies with MarketBeat.com's FREE daily email newsletter.
CarMax oznámil ve 2. čtvrtletí fiskálního roku 2027 růst tržeb o 19,5 % a GAAP zisk na akcii meziročně vyskočil o více než 80 % na 1,16 USD. Vedení plánuje ve fiskálním 3. čtvrtletí obnovit zpětné odkupy akcií.
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$30.26▼
$65.2838.75
$53.15
CarMax's NYSE: KMX latest results suggest its turnaround strategy is gaining traction. Its Shift into GEAR strategy is built around four pillars: Great Offering, Easy Experience, Add Value on Each Transaction and Run Lean. Together, they focus on improving pricing and inventory, simplifying the customer experience, increasing transaction profitability and reducing operating costs. The planned resumption of share buybacks this quarter is an important signal that management believes those improvements are durable. How much CarMax buys back remains unclear, but the move adds to the evidence that the company has turned a corner, is on track to sustain improvement, and can drive a full stock price recovery over time.
The potential stock price recovery is substantial if CarMax can sustain the recent improvement. CarMax trades more than 50% below its existing highs, setting the stage for more than 100% upside over time. The recovery will not happen quickly or in a straight line, so investors should expect volatility and periodic corrections, with resistance targets near $62 and $87.
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CarMax Q2 Results Show the Turnaround Gaining TractionIn its Q2 fiscal year 2027 (FY2027) earnings report, CarMax delivered 19.5% revenue growth, with sales comfortably beating consensus. The strength came from higher units and pricing, with units up 14.7% systemwide.
Wholesale led, up nearly 16%, but Retail was also strong, up by 14.7%, and both contributed to bottom-line strength. Within the Retail segment, same-store comps rose 13%, driving a 19.7% segment revenue gain, supported by a 6.3% increase in average pricing. Digital, among the pillars, influenced 81% of net sales, with omnichannel at 68%, and online retail accounting for 13% of retail unit sales.
CarMax accepted some gross margin pressure to support stronger sales, but better cost control helped offset the impact. SG&A grew far more slowly than revenue, showing that higher volume is beginning to create meaningful operating leverage.
That leverage carried through to earnings. GAAP earnings per share rose more than 80% year over year to $1.16, well ahead of the pace of revenue growth. CarMax did not issue formal guidance, but management said margins should continue improving and plans to resume share repurchases in fiscal Q3.
Analysts See Improvement, But Targets Still Lag the RallyCarMax Stock Forecast Today12-Month Stock Price Forecast:
$53.15
-10.05% Downside
Reduce
Based on 18 Analyst Ratings
Current Price$59.10High Forecast$74.00Average Forecast$53.15Low Forecast$36.00CarMax Stock Forecast Details
Initial analyst responses are constructive, highlighting improved operating efficiency and sizable revenue and earnings beats. While no revisions were released immediately after the report, the initial responses align with the trend, reflecting a bottoming after sustained downward pressure. The consensus rating remains Reduce, with a strong and strengthening Hold bias. The consensus price targets remain less encouraging, indicating more than 10% downside as of late September, but recent revisions point to the $75 region, representing a 25% upside from current levels.
Inflation and interest rates remain important variables for CarMax. While high prices and costs may keep some consumers out of the market, there is always a market for used cars, and others will trade down from buying new. In this environment, car owners may hold onto their cars longer, but will stick to lower-priced used cars over time. Other hurdles include execution and valuation, with the market pricing in a flawless turnaround, which has so far been the case. The main risks are weaker demand, execution missteps and a loss of momentum in the turnaround.
Stock price action is favorable following the release, but reflects the inherent risks. KMX surged more than 5% following the release, showing support at a key level while also facing resistance at higher prices. KMX could remain range-bound until investors see more evidence that the turnaround can hold. Strong support targets near $55 and $50 could produce a robust response. Retail traders will be the deciding factor, as institutions own nearly 100% of the floating shares. If retail traders don’t get on board the turnaround train, the stock price recovery is dead in the water.
The gross margin contraction needs context. Some of the pressure reflects deliberate pricing actions intended to support stronger sales. Lower gross profit per vehicle is the trade-off, but higher volume can create meaningful SG&A leverage. In addition, CarMax Auto Finance is core to profitability, underpinned by robust unit sales growth. The next major catalyst will be Q3 FY2027 results, which should provide more evidence of whether the sales momentum and operating leverage can continue as CarMax resumes share repurchases.
Should You Invest $1,000 in CarMax Right Now?Before you consider CarMax, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and CarMax wasn't on the list.
While CarMax currently has a Reduce rating among analysts, top-rated analysts believe these five stocks are better buys.
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CarMax zveřejnil konferenční hovor k výsledkům za 2. čtvrtletí fiskálního roku 2027. V úvodu zaznělo, že vedení poskytlo i výhled a komentář k budoucímu vývoji.
CarMax, Inc. (KMX) Q2 2027 Earnings Call September 29, 2026 8:00 AM EDT
Company Participants
David Lowenstein - Vice President of Investor Relations
Keith Barr - CEO, President & Director
Enrique Mayor-Mora - Executive VP, CFO & Principal Accounting Officer
Jon Daniels - Senior Vice President
Conference Call Participants
Daniela Haigian - Morgan Stanley, Research Division
Rajat Gupta - JPMorgan Chase & Co, Research Division
Jeffrey Lick - Stephens Inc., Research Division
Craig Kennison - Robert W. Baird & Co. Incorporated, Research Division
David Bellinger - Mizuho Securities USA LLC, Research Division
Joseph Spak - UBS Investment Bank, Research Division
John Babcock - Barclays Bank PLC, Research Division
Scot Ciccarelli - Truist Securities, Inc., Research Division
Alexander Perry - BofA Securities, Research Division
Christopher Pierce - Needham & Company, LLC, Research Division
Presentation
Operator
Ladies and gentlemen, thank you for standing by. Welcome to the Second Quarter Fiscal Year 2027 CarMax Earnings Release Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, David Lowenstein, VP, Investor Relations. Please go ahead.
David Lowenstein
Vice President of Investor Relations
Good morning. Thank you for joining our fiscal 2027 second quarter earnings conference call. I'm here today with Keith Barr, President and CEO; Enrique Mayor-Mora, Executive Vice President and CFO; and Jon Daniels, Executive Vice President, CarMax Auto Finance.
Let me remind you our statements today that are not statements of historical fact, including, but not limited to, statements regarding the company's future business plans, prospects and financial performance, are forward-looking statements we make pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on our current knowledge, expectations and assumptions and are subject to substantial risks and uncertainties that could cause actual results to differ materially from our expectations. In providing projections and other
CarMax (KMX - Free Report) came out with quarterly earnings of $1.16 per share, beating the Zacks Consensus Estimate of $0.68 per share. This compares to earnings of $0.64 per share a year ago. These figures are adjusted for non-recurring items.
This quarterly report represents an earnings surprise of +70.59%. A quarter ago, it was expected that this used car dealership chain would post earnings of $0.94 per share when it actually produced earnings of $1.31, delivering a surprise of +39.36%.
Over the last four quarters, the company has surpassed consensus EPS estimates four times.
CarMax, which belongs to the Zacks Automotive - Retail and Wholesale - Parts industry, posted revenues of $7.88 billion for the quarter ended August 2026, surpassing the Zacks Consensus Estimate by 11.54%. This compares to year-ago revenues of $6.59 billion. The company has topped consensus revenue estimates four times over the last four quarters.
The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.
CarMax shares have added about 46.4% since the beginning of the year versus the S&P 500's gain of 12.2%.
What's Next for CarMax?While CarMax has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?
There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.
Ahead of this earnings release, the estimate revisions trend for CarMax was mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $0.43 on $6.26 billion in revenues for the coming quarter and $2.73 on $27.24 billion in revenues for the current fiscal year.
Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Automotive - Retail and Wholesale - Parts is currently in the top 32% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
Another stock from the same industry, Advance Auto Parts (AAP - Free Report) , has yet to report results for the quarter ended September 2026.
This auto parts retailer is expected to post quarterly earnings of $0.80 per share in its upcoming report, which represents a year-over-year change of -13%. The consensus EPS estimate for the quarter has been revised 1% higher over the last 30 days to the current level.
Advance Auto Parts' revenues are expected to be $2.04 billion, up 0.2% from the year-ago quarter.
Wall Street expects a year-over-year increase in earnings on higher revenues when CarMax (KMX - Free Report) reports results for the quarter ended August 2026. While this widely-known consensus outlook is important in gauging the company's earnings picture, a powerful factor that could impact its near-term stock price is how the actual results compare to these estimates.
The earnings report, which is expected to be released on September 29, might help the stock move higher if these key numbers are better than expectations. On the other hand, if they miss, the stock may move lower.
While management's discussion of business conditions on the earnings call will mostly determine the sustainability of the immediate price change and future earnings expectations, it's worth having a handicapping insight into the odds of a positive EPS surprise.
Zacks Consensus EstimateThis used car dealership chain is expected to post quarterly earnings of $0.66 per share in its upcoming report, which represents a year-over-year change of +3.1%.
Revenues are expected to be $7.05 billion, up 6.9% from the year-ago quarter.
Estimate Revisions TrendThe consensus EPS estimate for the quarter has been revised 2.27% lower over the last 30 days to the current level. This is essentially a reflection of how the covering analysts have collectively reassessed their initial estimates over this period.
Investors should keep in mind that an aggregate change may not always reflect the direction of estimate revisions by each of the covering analysts.
Price, Consensus and EPS Surprise
Earnings WhisperEstimate revisions ahead of a company's earnings release offer clues to the business conditions for the period whose results are coming out. Our proprietary surprise prediction model -- the Zacks Earnings ESP (Expected Surprise Prediction) -- has this insight at its core.
The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; the Most Accurate Estimate is a more recent version of the Zacks Consensus EPS estimate. The idea here is that analysts revising their estimates right before an earnings release have the latest information, which could potentially be more accurate than what they and others contributing to the consensus had predicted earlier.
Thus, a positive or negative Earnings ESP reading theoretically indicates the likely deviation of the actual earnings from the consensus estimate. However, the model's predictive power is significant for positive ESP readings only.
A positive Earnings ESP is a strong predictor of an earnings beat, particularly when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). Our research shows that stocks with this combination produce a positive surprise nearly 70% of the time, and a solid Zacks Rank actually increases the predictive power of Earnings ESP.
Please note that a negative Earnings ESP reading is not indicative of an earnings miss. Our research shows that it is difficult to predict an earnings beat with any degree of confidence for stocks with negative Earnings ESP readings and/or Zacks Rank of 4 (Sell) or 5 (Strong Sell).
How Have the Numbers Shaped Up for CarMax?For CarMax, the Most Accurate Estimate is lower than the Zacks Consensus Estimate, suggesting that analysts have recently become bearish on the company's earnings prospects. This has resulted in an Earnings ESP of -6.67%.
On the other hand, the stock currently carries a Zacks Rank of #3.
So, this combination makes it difficult to conclusively predict that CarMax will beat the consensus EPS estimate.
Does Earnings Surprise History Hold Any Clue?Analysts often consider to what extent a company has been able to match consensus estimates in the past while calculating their estimates for its future earnings. So, it's worth taking a look at the surprise history for gauging its influence on the upcoming number.
For the last reported quarter, it was expected that CarMax would post earnings of $0.94 per share when it actually produced earnings of $1.31, delivering a surprise of +39.36%.
Over the last four quarters, the company has beaten consensus EPS estimates three times.
Bottom LineAn earnings beat or miss may not be the sole basis for a stock moving higher or lower. Many stocks end up losing ground despite an earnings beat due to other factors that disappoint investors. Similarly, unforeseen catalysts help a number of stocks gain despite an earnings miss.
That said, betting on stocks that are expected to beat earnings expectations does increase the odds of success. This is why it's worth checking a company's Earnings ESP and Zacks Rank ahead of its quarterly release. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.
CarMax doesn't appear a compelling earnings-beat candidate. However, investors should pay attention to other factors too for betting on this stock or staying away from it ahead of its earnings release.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
A month has gone by since the last earnings report for CarMax (KMX - Free Report) . Shares have added about 9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is CarMax due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the latest earnings report in order to get a better handle on the important drivers.
CarMax Q1 Earnings Beat EstimatesCarMax reported earnings per share of $1.31 for the first quarter of fiscal 2027, beating the Zacks Consensus Estimate of 94 cents by 39.61%. The bottom line declined 5.1% from $1.38 in the year-ago quarter.
Quarterly revenues rose 6.2% year over year to $8.01 billion, surpassing the consensus mark of $7.6 billion by 5.43%. Results benefited from higher retail and wholesale revenues, while combined retail and wholesale unit sales rose 3.3% to 392,357.
Sales Rise on Higher Vehicle PricingFor the quarter ended May 31, 2026, CarMax’s total net sales and operating revenues were $8.01 billion, up from $7.55 billion a year ago. Used vehicle sales increased 4.7% to $6.39 billion, reflecting a higher average retail selling price.
Total retail used vehicle unit sales were nearly flat at 230,293 versus 230,210 in the prior-year quarter. Comparable-store used-unit sales declined 0.8%, as the company lapped a year-ago quarter that benefited from tariff-driven demand.
Wholesale Momentum Supports the Top LineWholesale vehicle sales rose 14% year over year to $1.43 billion. Wholesale unit sales increased 8.4% to 162,064, while the average wholesale selling price climbed 5.1% to $8,364.
The wholesale business helped offset pressure on retail profitability. Wholesale vehicle gross profit increased 8.3% to $169.5 million, with gross profit per wholesale unit of $1,046, essentially in line with $1,047 in the prior-year quarter.
Margins Face Pricing PressureTotal gross profit declined 4.4% year over year to $854.4 million. Retail used vehicle gross profit fell 9.5% to $501.4 million, hurt by lower per-unit profitability.
Retail gross profit per used unit was $2,177, down $230 from last year’s all-time record due to the continuation of pricing actions aimed at driving an improved sales trend.
Cost Cuts Drive SG&A LeverageSelling, general and administrative expenses decreased 3.7% year over year to $635.2 million. The decline was primarily driven by lower compensation and benefits costs as the company made progress on targeted SG&A reductions.
SG&A per total unit improved 6.8% to $1,619, down $118 from the year-ago quarter. CarMax remains on track to achieve $200 million in SG&A exit-rate savings by the end of fiscal 2027.
Finance Arm Expands PenetrationCarMax Auto Finance’s income was $140.2 million, down 1% from the year-ago quarter. The decline reflected lower auto loans outstanding following last year’s $900 million non-prime securitization, partly offset by interest earned on higher-margin receivables and servicing income.
CAF financed 43.3% of units sold after the impact of three-day payoffs, up 150 basis points year over year. The total interest margin percentage improved 20 basis points to 6.7%, while the weighted average contract rate was 11.3%, broadly in line with the prior-year quarter.
Focus on Growth PillarsCEO Keith Barr introduced a four-pillar strategic framework focused on improving CarMax’s offering, simplifying the customer experience, adding value on each transaction and running lean. The company plans to share more details at a strategic update in late fall.
Pricing competitiveness, saleable inventory, digital-to-store conversion, CAF growth, EPP margin expansion, reconditioning efficiency and logistics improvements are key areas of focus for the company. The goal is to drive unit growth and earnings growth while supporting shareholder returns over time.
Balance Sheet Remains in FocusCarMax ended the quarter with cash and cash equivalents of $132.2 million and inventory of $4.06 billion. Long-term debt excluding the current portion was $2.06 billion, while the current portion of long-term debt was $17.2 million.
The company did not repurchase shares during the first quarter. It had $1.31 billion remaining under its share repurchase authorization as of May 31, 2026, and intends to resume buybacks at an appropriate time depending on market conditions, leverage and capital needs.
How Have Estimates Been Moving Since Then?Since the earnings release, investors have witnessed a upward trend in estimates revision.
VGM ScoresCurrently, CarMax has a average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a score of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
OutlookEstimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. It comes with little surprise CarMax has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
CarMax v červnu vzrostl téměř o 19 % po zvýšení cílových cen analytiky a nákupech insiderů. CEO Keith Barr koupil 9 400 akcií a čtyři členové představenstva dalších 14 674.
CarMax's (KMX 1.41%) summer started off well, with impressive stock performance despite a quarterly earnings report that, at least initially, wasn't well received. After analysts piled in with a clutch of price target raises and even a recommendation upgrade, the vehicle retailer's stock started heading north again. A series of insider buys also lifted confidence in the stock, and it exited June up by almost 19%.
Stop and start That earnings release was published on June 17, and, at least outwardly, CarMax did well against expectations. Net revenue was just over $8 billion in its first quarter of fiscal 2027, for a year-over-year gain of 6%. Net income under generally accepted accounting principles (GAAP) fell by 12%, however, to $186 million, or $1.31 per share.
Image source: Getty Images.
Despite the bottom-line decline, both metrics handily beat the consensus analyst estimates. On average, pundits tracking the auto retailer's stock were modeling revenue of less than $7.4 billion and GAAP net income of only $0.96 per share.
CarMax was a victim of timing, to an extent. As encouraging as some of the retailer's metrics were, they came at a time of persistently high gasoline prices, driven mostly by this country's conflict with Iran. Most of the models sold by the company are gas-consuming internal combustion engine (ICE) ones.
Also in mid-June, speculation grew that the U.S. Federal Reserve would raise interest rates; if that occurs, auto loans will become more expensive and will likely negatively affect the car market (and, more directly, squeeze the company's proprietary lending arm, CarMax Auto Finance).
Yet the reactions of analysts tracking CarMax stock were in stark contrast to those of investors selling their shares after the quarterly results were published. A clutch of them raised their price targets on CarMax, with one, Jeff Lick of Stephens, going so far as to upshift his recommendation on the stock. For him, it's now an overweight (read: buy), one notch up from his previous equalweight (hold). He also substantially raised his price target to $66 per share from the preceding $43.
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The inside scoop The bullishness in the stock stemming from those analyst moves was exacerbated by a series of insider stock purchases. The most notable buyer was CEO Keith Barr, who purchased 9,400 CarMax shares on June 22. Four members of the company's board of directors also opened their wallets for this purchase, collectively snapping up 14,674 shares.
I feel the immediate sell-off was unjustified; even if profitability declined, that sales growth figure was encouraging, and management seems to be implementing its new "four pillar" business strategy well. The only major concern I would have is gas prices; if they stay lofty, I'd worry that the mega-dealership could take some hits.
