CarMax (KMX) Q2 Earnings Miss Estimates, Decline 54% Y/Y

CarMax Inc. KMX reported second-quarter fiscal 2023 (ended Aug 31, 2022) net earnings per share of 79 cents, lagging the Zacks Consensus Estimate of $1.40 amid lower-than-anticipated revenues across all segments. The bottom line also fell from $1.72 per share recorded in the year-ago period. Our estimate for earnings per share was $1.43.

The auto retailer registered revenues of $8,145 million for the August-end quarter, which fell short of the Zacks Consensus Estimate of $8,749 million. The top line, however, recorded a 2% year-over-year increase. Our estimate for the top line was $8759.6 million.

Segmental Performance

CarMax’s used-vehicle net sales totaled $6,284.1 million for the reported quarter, up 2.9% year over year, owing to an increase in average retail selling prices. The metric, however, missed the consensus mark of $6,433 million. Our estimate for used vehicle revenues was $6,293.8 million. While the units sold in this segment inched down 6.4% year over year to 216,939 vehicles, the average selling price of used vehicles rose 9.6% from the year-ago quarter to $28,657. Comparable store used-vehicle units declined 8.3%, while revenues inched up 0.4% from the prior-year level. Used-vehicle gross profit per unit (GPU) came in at $2,282, up from the prior-year quarter’s $2,185, topping the consensus mark of $1,986.

For the fiscal second quarter, wholesale vehicle revenues tailed off 0.7% from the year-ago level to $1,690.3 million. The reported figure was below the Zacks Consensus Estimate of $2,046 million. Our estimate for wholesale vehicle revenues was $2,275.7 million. Units sold and average selling price declined 15.1% to 159,677 units, while ASP rose 17% to $10,179. Wholesale vehicle GPU came in at $881, down from the year-ago period’s $1,005.

Other sales and revenues contracted 6.6% year over year to $170.4 million for the fiscal second quarter and missed the consensus mark of $183 million. Our estimate for other sales and revenues was $190.1 million. CarMax Auto Finance witnessed an 8.6% year-over-year decline in income to $182.9 million for the May-end quarter.

Other Tidbits

Selling, general and administrative expenses flared up 16% from the prior-year quarter to $666 million. The firm had cash/cash equivalents and long-term debt of $56.7 million and $2,511.5 million, respectively, as of Aug 31, 2022.

During the fiscal second quarter, CarMax bought back 1.7 million shares of common stock for $163 million under the share repurchase program. As of Aug 31, 2022, it had $2.45 billion remaining under the share repurchase authorization.

The company opened three new stores during the fiscal second quarter. KMX currently operates more than 230 used car stores. In fiscal 2023, CarMax targets to open 10 stores.

Peer Releases

CarMax’s key peers include Advance Auto Parts AAP, O’Reilly Automotive ORLY and AutoZone AZO.

Advance Auto reported second-quarter 2022 (ended Jul 16, 2022) results on Aug 23. It posted adjusted earnings of $3.74 per share, up 10% from the year-ago quarter figure. The reported figure was in line with the Zacks Consensus Estimate. The company generated net revenues of $2,665.4 million, falling short of the Zacks Consensus Estimate of $2,748 million but edging up 0.6% from the year-ago reported figure.

Discouragingly, Advance Auto trimmed its 2022 guidance. It estimates full-year net sales in the band of $11-$11.2 billion, down from the previously guided range of $11.2-$11.5 billion. Comparable store sales are now envisioned to decline up to 1% as against the prior forecast of 1-3% growth. Adjusted operating income margin is envisioned in the range of 9.8-10%, down from the prior estimate of 10-10.2%. Adjusted EPS is now forecast between $12.75 and $13.25, down from the previously guided range of $13.30-$13.85. The auto parts retailer now intends to buy back stocks worth $500-$600 million in 2022. It aims to open 125-150 new stores this year.

O’Reilly released second-quarter 2022 results on Jul 27. It posted adjusted earnings per share of $8.78, missing the Zacks Consensus Estimate of $8.98. The bottom line, however, increased 5.4% from $8.33 recorded in the prior-year quarter. O’Reilly registered quarterly revenues of $3,670.7 million, missing the consensus mark of $3,696 million. The top line, however, was nearly 6% higher than the prior-year figure of $3,465.6 million.

During the quarter, ORLY opened 62 new stores in the United States. It did not open any new stores in Mexico. The total store count was 5,900 as of Jun 30, 2022. The company had cash and cash equivalents of $253.9 million at the end of the second quarter, falling from $631.6 million in the year-ago quarter. Its long-term debt was $4,669.8 million, higher than the year-ago level of $3,825.2 million.

AutoZone posted fourth-quarter fiscal 2022 results on Sep 19. It came out with earnings of $40.51 per share, up 13.4% from the prior-year figure of $35.72. The bottom line surpassed the Zacks Consensus Estimate of $38.38 a share. The net sales also grew 8.9% to $5,348.3 million. The top line beat the Zacks Consensus Estimate of $5,143 million.

During the fiscal year that ended Aug 27, 2022, AutoZone opened 118 new stores and closed one in the United States, opened 39 stores in Mexico and 20 stores in Brazil. The total store count was 6,943 as of Aug 27, 2022. AZO had cash and cash equivalents of $264.4 million as of Aug 27, 2022, down from $1,171.3 million on Aug 28, 2021. The total debt amounted to $6,122.1 million as of Aug 27, 2022, marking an increase from $5,269.8 million on Aug 28, 2021.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

O'Reilly Automotive, Inc. (ORLY) : Free Stock Analysis Report

Advance Auto Parts, Inc. (AAP) : Free Stock Analysis Report

AutoZone, Inc. (AZO) : Free Stock Analysis Report

CarMax, Inc. (KMX) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research