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CarMax (KMX) to Report Q2 Earnings: Is a Beat in Store?

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CarMax Inc. (KMX - Free Report) is slated to report second-quarter fiscal 2018 (ended Aug 31, 2017) results on Sep 22, before the opening bell. Last quarter, this specialty retailer of used and new vehicles delivered a positive earnings surprise of 15.3%.

The Richmond, VA-based company delivered positive earnings surprises in all the trailing four quarters with an average beat of 4.8%.

The company has a long-term growth rate of 14.3%.

CarMax Inc Price and EPS Surprise

Let’s see how things are shaping up prior to this announcement.

Why a Likely Positive Surprise?

Our proven model shows that CarMax is likely to beat estimates this earnings season. This is because a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen as you see below.

Zacks ESP: The Earnings ESP of CarMax is currently +3.89% as the Most Accurate estimate of 98 cents is above the Zacks Consensus Estimate of 94 cents. This makes us confident about an earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: CarMax carries a Zacks Rank #2, which increases the predictive power of ESP.

However, we caution against all Sell-rated stocks (#4 or 5) going into earnings announcement, especially when the company is witnessing negative estimate revisions.

Factors to Drive Better-than-Expected Results

CarMax focuses more on the used-car market and is one of the strongest operators among peers. This dominance in the market further helps the company hold a significant market share. In fiscal 2017, the sale of used-vehicles increased 6.7% from the year-ago level.

Also, CarMax’s aggressive store-expansions and frequent share repurchases should propel it to outperform.

Price Performance

Shares of CarMax have gained 6.4% year to date, significantly outperforming the industry’s 24.3% decline.

Other Stocks to Consider

Here are a few other companies worth considering in the same space, which comprise the right combination of elements per our model to post an earnings beat this quarter.

Harley-Davidson, Inc. (HOG - Free Report) has an Earnings ESP of +3.23% and a Zacks Rank #3. The company is expected to report third-quarter 2017 results on Oct 17. You can see the complete list of today’s Zacks #1 Rank stocks here.

Wabco Holdings Inc. (WBC - Free Report) has an Earnings ESP of +0.81% and a Zacks Rank #3. The company’s third-quarter 2017 financial results are expected to release on Oct 19.

PACCAR Inc. (PCAR - Free Report) has an Earnings ESP of +1.87% and a Zacks Rank #3. The company’s third-quarter 2017 financial results are expected to release on Oct 24.

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