A month has gone by since the last earnings report for CarMax (KMX Quick QuoteKMX - Free Report) . Shares have lost about 8.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is CarMax due for a breakout? 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 Q4 Earnings Surpass Expectations

CarMax posted adjusted earnings per share of 34 cents for the fourth quarter of fiscal 2026, beating the Zacks Consensus Estimate of 22 cents by 57.63%. The adjusted bottom line declined 46.9% from 64 cents in the year-ago quarter.

Quarterly revenues came in at $5,946 million, edging past the Zacks Consensus Estimate of $5,770 million by 3.01% but slipping 1% year over year. Results reflected pricing actions aimed at improving the retail sales trend, which weighed on per-unit profitability.

Pricing Actions Weigh on Retail Profitability

For the quarter ended Feb. 28, 2026, KMX reported total gross profit of $605.3 million, down 9.4% from the year-ago period. The decline was led by the retail business, where used-vehicle gross profit fell 9.6%.

Retail used gross profit per unit was $2,115, down $207 from last year’s record fourth quarter. Management attributed the decline to pricing actions implemented to drive an improved sales trend. Total retail used vehicle unit sales dipped 0.8% to 181,188, and comparable store used units decreased 1.9%.

CarMax’s wholesale results were mixed. Wholesale units increased 3% to 122,781, but gross profit per wholesale unit declined by $105 to $940. Other gross profit decreased 10.6%, primarily reflecting a reduction in service department margins.

SG&A Discipline Takes Shape Alongside Restructuring

Selling, general and administrative expenses were $611.3 million, essentially flat versus the prior-year quarter. The total included $33.9 million in restructuring charges impacting compensation and benefits and occupancy costs, as well as higher advertising expenses, which were offset by items like a reduced corporate bonus accrual, lower stock-based compensation expense and savings tied to a Customer Experience Center workforce reduction earlier in fiscal 2026.

Excluding restructuring charges, adjusted SG&A expenses were $577.4 million, down $33.1 million, or 5.4%, year over year. Even with that progress, SG&A as a percent of gross profit rose to 101% from 91.4% a year ago as gross profit dollars contracted.

CarMax raised its targeted SG&A reductions to $200 million in exit-rate savings by the end of fiscal 2027, up from the prior goal of $150 million. The company also said that it will shift its SG&A efficiency focus to a per total unit metric (retail and wholesale), which management views as better aligned with driving unit volume.

CAF Income Falls as Credit Strategy Continues to Evolve

CarMax Auto Finance (“CAF”) income decreased 9.8% year over year to $143.7 million in the fiscal fourth quarter. The company cited a lower balance of auto loans outstanding following a $900 million non-prime securitization completed in the third quarter, along with a higher provision for loan losses tied to CAF’s expansion across the credit spectrum.

CAF’s total interest margin percentage was 6.3% of average auto loans outstanding, up 10 basis points from the year-ago period. The provision for loan losses increased to $73.9 million from $68.3 million a year ago, reflecting higher Tier 2 penetration associated with the broader credit strategy.

On the volume side, after the impact of three-day payoffs, CAF financed 42.8% of units sold in the quarter, up from 42.3% in the prior-year quarter. The weighted average contract rate was 11.1%, unchanged from a year earlier.

Capital Allocation, Liquidity and Fiscal 2027 Spending Plans

KMX repurchased 1.3 million shares for $50.4 million during the quarter before pausing additional purchases. For fiscal 2026, the company repurchased 11.8 million shares for $631.8 million, and it finished the year with $1.31 billion remaining under its authorization.

CarMax ended fiscal 2026 with cash and cash equivalents of $122.8 million and inventory of $4.14 billion. Long-term debt excluding the current portion was $2.01 billion, while the current portion of long-term debt was $217.3 million.

On the growth front, the company opened one new store location in Florence, KY, and one stand-alone reconditioning/auction center in Frederick, MD, during the quarter. For fiscal 2027, CarMax plans to open four new stores, two stand-alone reconditioning/auction centers and two stand-alone auction facilities, with capital expenditures expected to be approximately $400 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

The consensus estimate has shifted -17.55% due to these changes.

VGM Scores

Currently, 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 grade 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Interestingly, CarMax has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.