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Why Is CarMax (KMX) Down 2% Since Last Earnings Report?
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A month has gone by since the last earnings report for CarMax (KMX - Free Report) . Shares have lost about 2% 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? Well, first let's take a quick look at the most recent earnings report in order to get a better handle on the recent catalysts for CarMax, Inc. before we dive into how investors and analysts have reacted as of late.
CarMax Q2 Earnings Beat Estimates
CarMax reported second-quarter fiscal 2027 earnings of $1.16 per share, which increased 81.3% year over year and beat the Zacks Consensus Estimate of 68 cents by 70.6%. Revenues increased 19.5% to $7.88 billion, surpassing the consensus mark of $7.06 billion by 11.5%.
Results benefited from strong retail and wholesale volumes, higher vehicle pricing and CarMax Auto Finance growth. Retail used-unit sales increased 13.8%, while comparable-store used-unit sales advanced 13%.
Sales Rise on Higher Volumes and Pricing
For the quarter ended Aug. 31, 2026, used vehicle sales increased 19.7% year over year to $6.31 billion. Total retail used vehicle unit sales rose 13.8% to 227,391. The average retail selling price increased 6.3%, or approximately $1,600 per unit, to $27,623.
CarMax bought 310,107 vehicles from consumers and dealers, up 5.9%. Purchases from consumers were flat at 262,570 vehicles, while dealer purchases surged 53.7% to 47,537. Digital capabilities supported 81% of retail unit sales, with omni sales representing 68% and online retail sales accounting for 13%.
Wholesale Business Maintains Momentum
Wholesale vehicle sales increased 18.2% year over year to $1.36 billion. Wholesale unit sales climbed 15.9% to 160,344, while the average wholesale selling price increased 1.8% to $8,036.
Wholesale vehicle gross profit was nearly flat at $137.6 million, as higher volumes were offset by weaker unit economics. Gross profit per wholesale unit declined by $135 to $858, highlighting the margin pressure accompanying stronger sales activity.
Margins Reflect Competitive Pricing Actions
Total gross profit increased 11.4% year over year to $799.5 million. Retail used vehicle gross profit rose 8.1% to $478.6 million, driven by higher volume. However, gross profit per used unit declined by $111 to $2,105 as KMX continued pricing actions to support sales trends.
Other gross profit rose 33.1% to $183.3 million. Extended Protection Plan margin dollars increased $26.5 million, supported by higher volume and a $46 rise in margin per retail unit to $623. Service margin improved $22 million, primarily reflecting cost-of-sales efficiency gains and leverage from unit growth.
Cost Control Drives SG&A Leverage
Selling, general and administrative expenses increased 4.6% year over year to $628.6 million. Despite the increase, SG&A per total unit fell $157, or 8.8%, to $1,621, reflecting leverage from the sharp rise in unit sales.
Ongoing cost-reduction efforts were partly offset by the annualization of materially reduced incentive-based compensation in the prior-year period and variable costs associated with higher volumes. Savings from reductions in field and corporate payroll provided an offset. CarMax remains on track to achieve $200 million in targeted SG&A exit-rate savings by the end of fiscal 2027.
Finance Arm Posts Strong Income Growth
CarMax Auto Finance income increased 32.1% year over year to $135.6 million, aided by a lower provision for loan losses. The provision declined to $113.4 million from $142.2 million. CAF also recorded a $16.6 million gain on the sale of auto loans and benefited from $6.1 million in servicing income.
CAF financed 40.9% of units sold after three-day payoffs, down from 42.6% a year earlier. However, it financed 22% of Tier 2 volume compared with 10% in the prior-year quarter. The total interest margin remained unchanged at 6.6%, while the weighted average contract rate increased 60 basis points to 11.8%.
Resumption of Share Repurchases
KMX ended the quarter with cash and cash equivalents of $170.5 million and inventory of $3.85 billion. Long-term debt, excluding the current portion, totaled $1.66 billion. The company generated $900.5 million in net cash from operating activities during the first six months of fiscal 2027.
CarMax did not repurchase shares during the quarter but plans to resume buybacks at a modest level in the third quarter. It had $1.31 billion remaining under its authorization as of Aug. 31, 2026.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
VGM Scores
At this time, CarMax has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock has a score of B on the value side, putting it in the top 40% for value investors.
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.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise CarMax has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
CarMax belongs to the Zacks Automotive - Retail and Wholesale - Parts industry. Another stock from the same industry, AutoZone (AZO - Free Report) , has gained 11.6% over the past month. More than a month has passed since the company reported results for the quarter ended August 2026.
AutoZone reported revenues of $6.59 billion in the last reported quarter, representing a year-over-year change of +5.6%. EPS of $56.05 for the same period compares with $48.71 a year ago.
AutoZone is expected to post earnings of $36.06 per share for the current quarter, representing a year-over-year change of +16.2%. Over the last 30 days, the Zacks Consensus Estimate has changed -2%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for AutoZone. Also, the stock has a VGM Score of D.
View the Zacks #1 Rank List
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Why Is CarMax (KMX) Down 2% Since Last Earnings Report?
A month has gone by since the last earnings report for CarMax (KMX - Free Report) . Shares have lost about 2% 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? Well, first let's take a quick look at the most recent earnings report in order to get a better handle on the recent catalysts for CarMax, Inc. before we dive into how investors and analysts have reacted as of late.
CarMax Q2 Earnings Beat Estimates
CarMax reported second-quarter fiscal 2027 earnings of $1.16 per share, which increased 81.3% year over year and beat the Zacks Consensus Estimate of 68 cents by 70.6%. Revenues increased 19.5% to $7.88 billion, surpassing the consensus mark of $7.06 billion by 11.5%.
Results benefited from strong retail and wholesale volumes, higher vehicle pricing and CarMax Auto Finance growth. Retail used-unit sales increased 13.8%, while comparable-store used-unit sales advanced 13%.
Sales Rise on Higher Volumes and Pricing
For the quarter ended Aug. 31, 2026, used vehicle sales increased 19.7% year over year to $6.31 billion. Total retail used vehicle unit sales rose 13.8% to 227,391. The average retail selling price increased 6.3%, or approximately $1,600 per unit, to $27,623.
CarMax bought 310,107 vehicles from consumers and dealers, up 5.9%. Purchases from consumers were flat at 262,570 vehicles, while dealer purchases surged 53.7% to 47,537. Digital capabilities supported 81% of retail unit sales, with omni sales representing 68% and online retail sales accounting for 13%.
Wholesale Business Maintains Momentum
Wholesale vehicle sales increased 18.2% year over year to $1.36 billion. Wholesale unit sales climbed 15.9% to 160,344, while the average wholesale selling price increased 1.8% to $8,036.
Wholesale vehicle gross profit was nearly flat at $137.6 million, as higher volumes were offset by weaker unit economics. Gross profit per wholesale unit declined by $135 to $858, highlighting the margin pressure accompanying stronger sales activity.
Margins Reflect Competitive Pricing Actions
Total gross profit increased 11.4% year over year to $799.5 million. Retail used vehicle gross profit rose 8.1% to $478.6 million, driven by higher volume. However, gross profit per used unit declined by $111 to $2,105 as KMX continued pricing actions to support sales trends.
Other gross profit rose 33.1% to $183.3 million. Extended Protection Plan margin dollars increased $26.5 million, supported by higher volume and a $46 rise in margin per retail unit to $623. Service margin improved $22 million, primarily reflecting cost-of-sales efficiency gains and leverage from unit growth.
Cost Control Drives SG&A Leverage
Selling, general and administrative expenses increased 4.6% year over year to $628.6 million. Despite the increase, SG&A per total unit fell $157, or 8.8%, to $1,621, reflecting leverage from the sharp rise in unit sales.
Ongoing cost-reduction efforts were partly offset by the annualization of materially reduced incentive-based compensation in the prior-year period and variable costs associated with higher volumes. Savings from reductions in field and corporate payroll provided an offset. CarMax remains on track to achieve $200 million in targeted SG&A exit-rate savings by the end of fiscal 2027.
Finance Arm Posts Strong Income Growth
CarMax Auto Finance income increased 32.1% year over year to $135.6 million, aided by a lower provision for loan losses. The provision declined to $113.4 million from $142.2 million. CAF also recorded a $16.6 million gain on the sale of auto loans and benefited from $6.1 million in servicing income.
CAF financed 40.9% of units sold after three-day payoffs, down from 42.6% a year earlier. However, it financed 22% of Tier 2 volume compared with 10% in the prior-year quarter. The total interest margin remained unchanged at 6.6%, while the weighted average contract rate increased 60 basis points to 11.8%.
Resumption of Share Repurchases
KMX ended the quarter with cash and cash equivalents of $170.5 million and inventory of $3.85 billion. Long-term debt, excluding the current portion, totaled $1.66 billion. The company generated $900.5 million in net cash from operating activities during the first six months of fiscal 2027.
CarMax did not repurchase shares during the quarter but plans to resume buybacks at a modest level in the third quarter. It had $1.31 billion remaining under its authorization as of Aug. 31, 2026.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
VGM Scores
At this time, CarMax has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock has a score of B on the value side, putting it in the top 40% for value investors.
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.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise CarMax has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
CarMax belongs to the Zacks Automotive - Retail and Wholesale - Parts industry. Another stock from the same industry, AutoZone (AZO - Free Report) , has gained 11.6% over the past month. More than a month has passed since the company reported results for the quarter ended August 2026.
AutoZone reported revenues of $6.59 billion in the last reported quarter, representing a year-over-year change of +5.6%. EPS of $56.05 for the same period compares with $48.71 a year ago.
AutoZone is expected to post earnings of $36.06 per share for the current quarter, representing a year-over-year change of +16.2%. Over the last 30 days, the Zacks Consensus Estimate has changed -2%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for AutoZone. Also, the stock has a VGM Score of D.