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CarMax (KMX) to Report Q4 Earnings: What's in the Offing?

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CarMax Inc. (KMX - Free Report) is set to report fourth-quarter and fiscal 2019 results, before the market opens on Mar 29. In the last reported quarter, the company recorded an earnings beat of 7.9%. In the trailing four quarters, it surpassed estimates thrice while missing once, the average beat being 1.5%.

In the past three months, shares of CarMax have underperformed the industry it belongs to. During that time frame, the stock has declined 1.5% compared with the industry’s growth of 10.4%.

Let’s see how things are shaping up for the upcoming announcement.

CarMax, Inc. Price and EPS Surprise

 

CarMax, Inc. Price and EPS Surprise | CarMax, Inc. Quote

Factors Influencing This Quarter

CarMax pursues an aggressive store expansion initiative. During third-quarter fiscal 2019, it opened four stores in new television markets of Wilmington, NC; Lafayette, LA; Corpus Christi, TX; and Shreveport, LA. Within 12 months from Nov 30, 2018, the company plans to enter eight new television markets and expand in seven existing ones. Within 12 months from Nov 30, 2018, it intends to open 15 stores, of which six will be in small markets. All these initiatives are likely to have positive influence on the company’s sales in the soon-to-be-released quarter.

Compared with the third quarter of fiscal 2018, SG&A expenses increased 2.5% to $409.5 million in the third quarter of fiscal 2019. This escalation is mainly on account of expenses related to store openings. Increased investments to develop technology and digital platforms, and rising compensation expenses are also contributing to the headwind.

The Zacks Consensus Estimate for net sales of wholesale vehicles is pegged at $577 million for the soon-to-be-released quarter. In third-quarter fiscal 2019, net sales of wholesale vehicles were $604 million.

For used-vehicle retail, the Zacks Consensus Estimate for net sales is pegged at $3.88 billion. In the last reported quarter, the company recorded net sales of $3.55 billion.

The Zacks Consensus Estimate for the Other segment’s sales is pinned at $151 million, whereas the company recorded $144 million in the last reported quarter.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for CarMax this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as you will see below.

Earnings ESP: CarMax’ Earnings ESP is 0.00% as the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at $1.04.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: CarMax presently carries a Zacks Rank #3.

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

Stocks to Consider

Here are a few stocks, with the right combination of elements:

Genuine Parts Company (GPC - Free Report) has an Earnings ESP of +0.38% and it currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Visteon Corporation (VC - Free Report) has an Earnings ESP of +33.57% and it currently carries a Zacks Rank #3.

Comcast Corporation (CMCSA - Free Report) has an Earnings ESP of +4.53% and it currently has a Zacks Rank of 3.

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