uploads/2019/12/CarMax.jpeg

Will CarMax’s Q1 Earnings Boost Its Stock Price?

By

Updated

CarMax (NYSE:KMX) stock rose 1.4% in the pre-market trading session today at 8:38 AM ET. The used car retailer reported its earnings for the first quarter of fiscal 2021, which ended May 31, before the markets opened. CarMax reported mixed results in the first quarter. Although the revenues beat analysts’ expectations, the earnings were below the estimates.

Article continues below advertisement

CarMax’s Q1 earnings results

In the first quarter, CarMax reported an adjusted EPS of -$0.15 compared to $1.59 in the first quarter of fiscal 2020. The earnings missed analysts’ consensus estimate of $0.04 per share. CarMax generated sales of $3.23 billion—a reduction of 39.8% from the first quarter of fiscal 2020. The company beat analysts’ consensus sales estimate of $2.7 billion.

In the first-quarter earnings release, CarMax said, “More than 80% of the days in the quarter were negatively impacted by a mix of store closures and limited operations. In addition, open stores were also impacted by occupancy restrictions.” CarMax CEO Bill Nash said, “We continued our omni-channel rollout and launched new initiatives, such as contactless curbside pickup, a temporary extension of our 90-day warranty and CAF payment assistance to meet the near-term needs of our customers; we introduced social distancing and enhanced sanitation procedures; and we shifted our entire wholesale business from in-person to online auctions.”

Wall Street analysts expect CarMax to report an adjusted EPS of $0.57 on revenues of $3.97 billion in the second quarter. Analysts also expect CarMax’s revenues to fall by 18.1% YoY (year-over-year) in fiscal 2021 to $16.6 billion. The sales could rise by 21.3% YoY in fiscal 2022 to $20.2 billion. The adjusted earnings will likely fall by 49.5% YoY in fiscal 2021 to $2.69 per share. However, the profits could rise by 85.9% YoY to $5.00 per share in fiscal 2022.

Article continues below advertisement

Analysts’ recommendations and target price

Among the 16 analysts following CarMax stock, eight recommend a “strong buy,” six recommend a “buy,” and two recommend a “hold.” None of the analysts recommend a “sell.” Wall Street analysts have a 12-month target price of $95.91 for CarMax stock. Overall, the target price implies a downside potential of 2.0% compared to the stock’s closing price on Thursday. The consensus target price for the stock has risen from $83.09 in May—a growth of 15.4%.

Stock returns

CarMax stock rose 1.0% on Thursday and ended the day at $97.91. At this closing price, the company’s market cap is $15.9 billion. Notably, the stock is trading 5.1% below its 52-week high of $103.18 and 160.5% above its 52-week low of $37.59. So far, the stock has risen by around 11.7% year-to-date.

Based on the closing price on Thursday, CarMax stock was trading 6.1% above its 20-day moving average of $92.24. The stock is also trading 22.8% above its 50-day moving average of $79.75 and 24.0% above its 100-day moving average of $78.96. CarMax’s 14-day relative strength index score of 66 indicates that it’s approaching overbought levels.

At 9:02 AM ET today, the S&P futures and the Dow futures rose 1.2% and 1.3%, respectively. To learn more, read Jeremy Grantham Said US Stock Markets Are in a Bubble.

Advertisement

More From Market Realist