CarMax, Inc. (KMX) shares are on the rise today after the company announced mixed second-quarter earnings results. While the company’s revenue surpassed analysts’ forecasts, earnings per share fell slightly short of expectations. Despite this, investors seem optimistic about CarMax’s performance, pushing the stock price up over 3%.
The company reported earnings per share of 85 cents, missing the analyst consensus estimate of 86 cents. However, CarMax’s total revenue of $7.01 billion exceeded the street view of $6.79 billion. This strong revenue performance was fueled by a 5.1% increase in retail used unit sales and a 4.3% increase in comparable store used unit sales compared to the same period last year.
CarMax’s Auto Finance income, however, experienced a decline of 14.4% year-over-year, reaching $115.6 million. This decrease was primarily attributed to an increase in the provision for loan losses, which outweighed growth in average managed receivables and a stable net interest margin percentage.
Despite the challenges in its Auto Finance segment, CarMax demonstrated strong performance in other areas. Gross profit per retail used unit reached $2,269, while gross profit per wholesale unit was $975, both consistent with the previous year. The company also saw significant growth in its Extended Protection Plan (EPP) and service margins, indicating strong customer demand for these value-added services.
Bill Nash, CarMax’s president and CEO, expressed satisfaction with the company’s overall performance, stating that they delivered “strong margins, continued to manage SG&A, and drove double-digit earnings growth while managing through industry-wide auto loan loss pressure.” CarMax also remains committed to expansion, opening two new store locations in El Paso, Texas and Gainesville, Georgia during the second quarter. The company plans to open a total of five new stores, one stand-alone reconditioning center, and one stand-alone auction facility in fiscal year 2025.
CarMax exited the quarter with a healthy cash position of $1.25 billion and a robust inventory level of $3.397 billion. The company also has $2.15 billion remaining available for share repurchases under its current authorization.
Despite the mixed earnings report, CarMax’s strong revenue growth, robust margins, and continued expansion plans seem to have resonated positively with investors, driving the stock price higher in today’s trading session.
