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CarMax (KMX) Earnings Preview

by | Jun 20, 2021

CarMax (KMX) reporting earnings on 6/25 before the open with the Street looking for $1.63 on $6.23B. Next quarter is guided to $1.55/$5.88B while the FY is $5.79 and $23.03B. Shares have traded lower in each of the last seven reports with an average closing move of 6.15% and a max move of 11%. The current implied move is 5.67%. Shares are near a breakdown out of a bear flag under $112.50 with room back to $101.50 as it fills a low-volume gap.  The $18.2B company trades 17.6X earnings, 0.96X sales, and 36X FCF. KMX is a leading retailer of used vehicles in the US and benefitting from rising demand over the last year. There’s been a surge in wholesale prices this year as well but Manheim data indicating that the rise has slowed in recent months with the first two weeks of June up just 0.29% and could put further pressure on near-term guidance. Analysts have an average target for shares of $123.50 and a Street High $165. Wedbush cut shares to Neutral in May citing toughening comps in May coupled with tight inventory that have led to a deceleration from the mid-teens growth levels versus 2019 in March and April down to the +LSD levels in May-to-date, a potential sign that share gains experienced throughout a time where comparisons were easiest are slowing. At the same time, wholesale prices have started to level out, and new car inventories are starting to improve, which could slow underlying used unit market growth versus 2019. Short interest is 2.6% and down at multi-year lows. Hedge fund ownership rose 1.2% in Q1. In October, a director bought $252K in stock at $93.40.

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