Back to top

Analyst Blog

Shares of CarMax Inc. (KMX - Analyst Report) hit a 52-week high of $41.94 on Mar 15. Shares of the company started escalating buoyed by its impressive fiscal third-quarter results, aggressive store expansion strategy, fast recovery in the auto industry and recent extension of its share buyback program. The company's previous 52-week high was $41.69.

CarMax is one of the largest retailers of used vehicles. The company pioneered the used car superstore concept with the inauguration of its first store in 1993. It operated around 117 used car superstores in 58 markets as of Dec 20, 2012. It has a market cap of $9.5 billion.

CarMax benefits from its focus in the used-vehicle market, which will help outgrow peers. Moreover, the company’s inventories are closely aligned with sales trends, which optimize gross profit per vehicle sold while offering great value to customers. Currently, it retains a Zacks Rank #2 (Buy).

CarMax reported a 13.9% rise in earnings per share to $0.41 in the third quarter of fiscal 2013 ended on Nov 30, 2012 from $0.36 in the year-ago quarter. Earnings surpassed the Zacks Consensus Estimate of 39 cents per share.

The company’s net sales and operating revenues for the quarter climbed 15.1% to $2.6 billion from $2.3 billion in the third quarter of fiscal 2012. Revenues also beat the Zacks Consensus Estimate of $2.5 billion.

In the first nine months of fiscal 2013, the company opened 8 superstores. CarMax plans to open 10 superstores in fiscal 2013.

Last month, the board of directors of CarMax approved an extension of its existing share repurchase program to $500 million from $300 million due to its confidence in the business and ability to deliver its growth objectives. The extended authorization will expire on Dec 31, 2014.

On Oct 17, 2012, CarMax’ board authorized the repurchase of up to $300 million of its common stock, which was supposed to expire on Dec 31, 2013. As of Nov 30, 2012, the company repurchased 1.7 million shares of its common stock for an average price of $34.53, leaving $239.8 million available for repurchase.

Auto sales in the U.S. rose modestly by 3.7% year over year to 1.19 million vehicles in February. This translated into a seasonally adjusted annual rate (SAAR) of 15.4 million units for the year, up about 2% from 15.1 million units registered in the same month of 2012.

Sadly, the growth rate in sales came at the lower end of the 4%–6% projection made by TrueCar.com and Edmunds.com. This can be attributable to rising gas prices (up 36 cents to $3.78 per gallon in February) and turbulence in the stock market. However, improving construction market, cheap financing and strong pent-up demand kept the recovery in the U.S. auto industry on track.

Besides CarMax, other stocks in the auto retailers industry that are currently performing well include Lithia Motors  Inc. (LAD - Snapshot Report), Penske Automotive Group, Inc. (PAG - Analyst Report) and Sonic Automotive Inc. (SAH - Snapshot Report). These stocks carry a Zacks Rank #2 (Buy).
 

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
ERBA DIAGNO… ERB 3.80 +7.04%
BANCO DO BR… BDORY 14.74 +5.66%
AIR INDUSTR… AIRI 9.99 +4.15%
EQT MIDSTRE… EQM 98.14 +3.38%
WEATHERFORD… WFT 23.64 +3.10%