CarMax ($KMX) is projected to achieve results for its fiscal third quarter that align closely with market expectations, bolstered by new "digital progression tools" designed to enhance used car sales, as noted by Wedbush Securities. The retail giant is anticipated to deliver comparable sales growth in the used car segment at around 2.5%, closely matching the consensus estimate of 3%.
CarMax is scheduled to release its results on Thursday. The expected performance will likely demonstrate a "strong performance to end the quarter, supported by the newly completed rollout of digital progression tools that enable customers to complete transactions initiated online in-store and vice versa," analysts Seth Basham and Matthew McCartney remarked. If CarMax meets these expectations, this will mark two consecutive quarters of solid comparable sales performance, possibly accompanied by further market share gains.
Data from Cox Automotive indicates that retail used car sales across the industry have declined by 1% year-over-year during the initial months of the third quarter, according to Basham and McCartney. Wedbush has reiterated an outperform rating on CarMax, setting a price target of $95 for the stock.
The brokerage has also raised its earnings per share forecast for the third quarter to $0.57, though this remains lower than the Street's prediction of $0.60. They are now projecting revenue of $6.09 billion, an increase from an earlier expectation of $6.05 billion, which aligns with consensus estimates from a FactSet survey. CarMax Auto Finance may experience "modest downside risk" based on intra-quarter data, as stated by Wedbush.
Shares of CarMax experienced a decline of 2.7% during midday trading. In the wholesale sector, prices dropping at a rate less than historical seasonality could lead to slight upside in the gross profit per unit consensus forecast of $970, the analysts pointed out. Additionally, selling, general, and administrative costs are anticipated to remain in line. Furthermore, the analysts noted, "We believe that CarMax can maintain its retail gross profit per unit in this favorable pricing environment, supporting a second consecutive strong quarter of gross profit comparisons that significantly surpass those of publicly traded franchised dealers.".