CarMax today
(As of 12/20/2024 5:45 PM ET)
- 52 week range
- $65.83
▼
$91.25
- P/E ratio
- 31.68
- Target price
- $85.17
CarMax New York Stock Exchange: KMX 2204 faced challenges, but it is weathering the tough times well, selling more cars than expected and maintaining healthy profits. The company is not thriving, but it is growing and creating leverage for when economic pressures ease.
Meanwhile, now the company can implement its plans by buying back shares, and the volume of buybacks is significant. Activity in the third quarter exceeded $114 million, and the number of shares decreased by 2.2% year-over-year (YoY).
CarMax’s share repurchases are expected to continue due to strong third-quarter margins and the remaining $2.04 billion in current authorization. On the business side, demand for used cars is strong and is expected to improve as interest rates fall. The only bad news is that the pace of interest rate cuts is lower than the Fed initially indicated, and it may take a few more quarters for earnings growth to improve significantly.
CarMax delivered better results in the third quarter, and its stock price rose even higher
CarMax posted a strong quarter in the third quarter despite lower selling prices for used vehicles. The key details are that demand remains strong, with online volumes up 5.8%, driven by positive results across all segments, and CEO William Nash saying the market is stabilizing. Third-quarter results included $6.22 billion in net sales, up 1.1% year over year and 280 basis points better than expected. Retail sales increased by 5.4% and wholesale sales by 6.3%, which was offset by a decrease in average prices by 3.9% and 5.7%, respectively. Sales were supported by a 7.9% increase in units purchased, supported by a 15% increase in digital channels.
CarMax stock forecast today
$85.17
Growth potential 1.06%Hold
Based on ratings from 14 analysts
| High forecast | $105.00 |
|---|---|
| Average forecast | $85.17 |
| Low forecast | US$50.00 |
CarMax Stock Forecast Details
Margin news is the best in the report. The company increased its gross profit, despite lower average selling prices, by controlling costs. The increase in gross margin was partially offset by a 20 basis point increase in selling and administrative expenses, but only partially. The end result is a 70 basis point improvement in net margin to improve leveraged net income. Net income of $125.4 million rose more than 50% year-over-year, resulting in adjusted earnings per share of $0.81, $0.20 better than the MarketBeat consensus and up 56% year-over-year. year.
Carmax gave no guidance, but showed strength and returned to growth sooner than expected. Analysts’ consensus for the fourth quarter, which forecast sequential seasonal declines but revenue growth of 3% YoY, is likely too low. In this scenario, investors can expect analysts to raise their estimates for the quarter, the year, and next year and provide tailwinds for the market.
Carmax adds value to investors in Q3
Carmax’s third-quarter balance sheet shows the company is adding value to investors. Details include a decrease in current assets tied to the cash balance, but total assets increased due to increases in accounts receivable and property, and long-term debt and total liabilities decreased. The result is an increase in equity capital of 2.75% and a low level of leverage, which ensures a stable financial position of the business. The company’s net debt is just 0.25x equity.
However, investing in Carmax is not without risks. Short sellers are interested in these stocks and have a reason. The used car market is stronger than expected but still struggling, and the impact of lower rates may already be factored into the equation. Short interest ahead of the report was over 10%, which isn’t much, but high enough to create a headwind for stock prices.
Post-release price action includes a jump in prices at the open, but subsequent activity suggests short sellers took advantage of the rally. The market forms a large bearish candle and shows significant resistance at the top of the established trading range. The positive is that the market has not fallen below critical support at the short-term moving average and may maintain an uptrend over the next few weeks or months.
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