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CarMax (KMX) Gears Up for Q4 Earnings: What's in Store?

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CarMax Inc. (KMX - Free Report) is slated to release fourth-quarter fiscal 2021 results on Apr 1, before the opening bell. The Zacks Consensus Estimate for the to-be-reported quarter’s earnings is pegged at $1.27 cents on revenues of $5.15 billion.

The used car dealership chain delivered better-than-expected results in the last reported quarter on higher-than-expected gross profit from the company’s wholesale vehicles segment. CarMax surpassed estimates in each of the trailing four quarters, the average surprise being 150.3%. This is depicted in the graph below:

CarMax, Inc. Price and EPS Surprise

CarMax, Inc. Price and EPS Surprise

CarMax, Inc. price-eps-surprise | CarMax, Inc. Quote

Q4 Estimates

The Zacks Consensus Estimate for CarMax’s fiscal fourth-quarter earnings per share has been revised downward by 2 cents in the past 30 days. Also, it compares unfavorably with the year-ago quarter’s earnings of $1.30 per share. The Zacks Consensus Estimate for quarterly revenues suggests year-over-year growth of 3.7%.

Factors to Note

CarMax’s focus on the used vehicle market is likely to have benefitedthe company’s performancein the quarter to be reported. Amid the coronavirus-induced economic uncertainty, customers are more likely to have preferred purchase of used cars instead ofsplurging on expensive new vehicles. This is anticipated to get reflected inthe company’s top line. 

Further, the company’s omni-channel offerings— that providesa personalized multichannel experience— has beenimproving the shopping experience of buyers and is likely to have driven its top line during the quarter-to-be reported.The firm’s efforts to boost its online shopping capabilities, and amenities like ship-to-home next day, buy online, pick-up in stores and commercial customer ordering are likely to havecontributed to its performanceduring the period under discussion.

While the firm is anticipated to have gainedfrom above mentioned factors, high costs associated with store expansion, rollout of advanced digital initiatives might have weighed on the bottom line. With CarMax resuming construction activity on new stores since the last reported quarter, margins maybe dented to certain extent. Increased investments to develop technology platforms and digital initiatives are also likely to have addedto the cost woes in the fiscal fourth quarter of 2021.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for CarMax this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

CarMax—whose peers include Advance Auto Parts (AAP - Free Report) , O’Reilly Automotive (ORLY - Free Report) and AutoZone (AZO - Free Report) — currently has a Zacks Rank #3 and an Earnings ESP of -2.89%. This is because the Most Accurate Estimate is pegged 4 cents lower than the Zacks Consensus Estimate.  You can see the complete list of today’s Zacks #1 Rank stocks here.

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