CarMax Q4: Analyst Predicts In-Line Results Amid Ongoing Operational Challenges

William Blair analyst Sharon Zackfia reiterated an Outperform rating on the shares of CarMax Inc KMX.
Citing persistent industry headwinds, the analyst has lowered fiscal fourth-quarter used unit comparable sales projection to -11% to -12%, in-line with the consensus.
The analyst also lowered the February quarter EPS estimate by $0.04 to $0.21, similar to the consensus of $0.21.
The wholesale sales are expected to decline 40%-plus Y/Y due to reallocation of some cars from wholesale to retail to meet the demand for lower-priced cars.
The analyst, as previously stated, projects a roughly $90 year-over-year increase in retail GPU to $2,287 on strong inventory management.
Following a hiatus after the collapse of SVB, the auto ABS (Asset-Backed Securities) market is opening up, with about four deals priced in late March, said the analyst.
As a result, the analyst feels the time favors CarMax to do its typical ABS in late April.
For FY24, the analyst expects comparable sales to improve sequentially as the year progresses, with an inflection into positive territory in the second half.
CarMax remains a very well-managed profitable company in a very large market.
Managing a large pool of fast-depreciating assets, reliance on asset-backed securitizations to fund CarMax Auto Finance, and the inherent economic sensitivity associated with selling big-ticket discretionary items are some of the company's risks.
Also Read: Car Market Did Something It Hasn't Done In 8 Months: Pay Attention This Friday
Price Action: KMX shares are trading higher by 2.00% at $63.69 on the last check Thursday.

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