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CarMax (KMX) Q1 Earnings Beat on Wholesale Unit Strength

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CarMax Inc. KMX reported first-quarter fiscal 2023 (ended May 31, 2022) net earnings per share of $1.56, beating the Zacks Consensus Estimate of $1.51 amid higher-than-anticipated revenues from the wholesale segment. The bottom line, however, decreased from $2.63 per share recorded in the year-ago period. The auto retailer registered revenues of $9,311 million for the May-end quarter, which fell short of the Zacks Consensus Estimate of $9,375 million. The top line, however, recorded a 21% year-over-year increase.

Segmental Performance

CarMax’s used-vehicle net sales totaled $7,014.5 million for the reported quarter, up 13.9% year over year, owing to an increase in average retail selling prices. The metric, however, missed the consensus mark of $7,070 million. While the units sold in this segment inched down 11% year over year to 240,950 vehicles, the average selling price of used vehicles soared 28% from the year-ago quarter to $28,844. Comparable store used-vehicle units declined 12.7%, while revenues climbed 11.6% from the prior-year level. Used-vehicle gross profit per unit (GPU) came in at $2,339, up from the prior-year quarter’s $2,205.

For the fiscal first quarter, wholesale vehicle revenues grew 54% from the year-ago level to $2,116.5 million. The reported figure also beat the Zacks Consensus Estimate of $1,907 million. Units sold and average selling price rose 2.7% and 51.3% year over year to 186,307 and $10,996, respectively. Wholesale vehicle GPU came in at $1,029, which inched up from the year-ago period’s $1,025.

Other sales and revenues rose 8.9% year over year to $180.6 million for the fiscal first quarter but missed the consensus mark of $184 million. CarMax Auto Finance witnessed a 15.4% year-over-year uptick in income to $204.5 million for the May-end quarter.

Other Tidbits

Selling, general and administrative expenses flared up 18.5% from the prior-year quarter to $656.7 million. The firm had cash/cash equivalents and long-term debt of $95.3 million and $2,569.7 million, respectively, as of May 31, 2022.

During the fiscal first quarter, CarMax bought back 1.6 million shares of common stock for $157.6 million under the share repurchase program. As of May 31, 2022, it had $2.62 billion remaining under the share-repurchase authorization.

This Zacks Rank #5 (Strong Sell) company opened one new store during the fiscal first quarter. KMX currently operates more than 230 used car stores. In fiscal 2023, CarMax targets to open 10 stores. It expects fiscal 2023 capital expenditure to increase to $500 million. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Peer Releases

CarMax’s key peers include O’Reilly Automotive ORLY and AutoZone AZO.

O’Reilly posted first-quarter 2022 results on Apr 27. Its quarterly adjusted earnings per share of $7.17 missed the Zacks Consensus Estimate of $7.43. The bottom line, however, increased from $7.06 a share recorded in the prior-year quarter. This automotive parts retailer registered quarterly revenues of $3,296 million, beating the consensus mark of $3,283.3 million. The top line was also 6.6% higher than the prior-year figure of $3,090.9 million. Comps grew 4.8% year over year, topping the Zacks Consensus Estimate of 4.17%.

O’Reilly had cash and cash equivalents of $191.5 million as of Mar 31, 2022, lower than $611 million in the year-ago quarter. Its long-term debt was $3,828 million, higher than the year-ago level of $3,824.3 million. For 2022, ORLY expects total revenues within the range of $14.2-$14.5 billion. Earnings per share are estimated in the band of $32.35-$32.85. The company forecasts comparable store sales growth within 5-7%. Free cash flow is expected to remain in the band of $1.3-$1.6 billion and capital expenditures within $650-$750 million.

AutoZone reported third-quarter fiscal 2022 on May 24. Its quarterly earnings of $29.03 per share rose 9.6% from the prior-year figure of $26.48. The bottom line also surpassed the Zacks Consensus Estimate of $25.87. Net sales also grew 5.8% to $3,865.2 million. The top line beat the Zacks Consensus Estimate of $3,702 million. In the reported quarter, domestic commercial sales totaled $1,044.3 million, up from $828.6 million recorded in the year-ago period. Domestic same-store sales (sales at stores open at least for a year) rose 2.6% in the quarter under discussion.

During the fiscal third quarter, AutoZone opened 24 new stores, four in Mexico and three in Brazil. It exited the quarter with 6,115 stores in the United States, 673 in Mexico and 58 in Brazil. The total store count was 6,846 as of May 7, 2022. AutoZone had cash and cash equivalents of $263 million as of May 7, 2022, down from $975 million on May 8, 2021. Total debt amounted to $6,057.4 million as of May 7, 2022, marking an increase from $5,267.9 million on May 8, 2021.


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