CarMax

CarMax Posts Financial Results for Q3 FY 2016

CarMax

CarMax (KMX) is well known as a retailer of used cards. It is considered to be the largest such retailer in the United States and is classed as a Fortune 500 company. It was founded in 1993 and, at the moment, it owns and operates 128 locations throughout the country. It received the award of “America’s Most Admired Company in Automotive Retailing” a couple of years ago and is classed as one of the “100 Best Companies to Work For”, a position it has maintained from 2005 until today.

The company recently posted their financial results for their third quarter of the 2016 fiscal year. Thus, the used car retailer posted EPS of $0.6 on revenues that hit the $3.4 billion mark. This is massive progress over the results the company achieved during the same quarter of the previous year, when the EPS worked out to $0.47 and revenues were $2.94 billion. CarMax managed to beat out the Thompson Reuter prediction of $0.54 in EPS and $3.26 billion in revenues.

CarMax didn’t want to provide any other predictions or guidance, but analysts didn’t have any such qualms. Thus, analysts are expecting the company to post $0.58 EPS for Q4 with $3.46 billion in revenues. They are expecting the full year to come in strong at EPS of $2.52 with overall revenues working out to $14.11 billion. The Chief Executive Officer of CarMax, who is quite proud and rightfully so, announced recently that the company had exhibited solid performance.

The excellent results also cover their wholesale, used, and auto finance segments. They also showed solid growth in their store base as well as a stock buyback program that ran throughout Q3. The firm achieved a growth in same store sales for used cars of 7.4 percent when compared to the same quarter of the previous year. Statistics show that they have significantly improved the amount of client traffic as well as conversion rates.

Sales of used vehicles increased by 14 percent on a year over year basis. CarMax is also known for the financing they offer, and that segment of the company reported profits were up by 6.9 percent on a year over year basis. CarMax is also looking at originating loans tailored to subprime borrowers so they can offer them to subprime lenders to motivate them to finance. November saw the company report $56.7 million outstanding in this specific scheme, with only 21 percent generated during the quarter.

Statistics from the National Automobile Dealers Association show that the price of used cars increased by 1.1 percent towards the end of November, compared to prices in the same month of last year. Furthermore, prices are expected to increase even more, with pick-up trucks expected to go up by 9.6 percent.

CarMax saw their shares climb by 9.5 percent, reaching $66.29. If it lasts, this could set a new high for the company. Thomson Reuters’ price target per share before results were published was $57.4. The company has lots of expectations and hopes for next year but only time can tell how well they will do.

 


About

Jason Seligman covers multi-industry micro cap companies at Micro Cap Mag. Jason has covered the US industrial space for over 6 years and has been an equity research analyst for 11 years, based in London, Hong Kong and (currently) Washington DC.


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