CarMax Driving Home Profits For You

CarMax, Inc KMX reported sharply higher earnings this morning, and shares are driving home gains this morning, rising more than 8% in pre-market. The company, which is the country's largest used-car dealer reported earnings of 55 cents per share on $2.68 billion in revenues. This is sharply higher, when the company reported earnings of 44 cents per share last year. Wall Street analysts had been expecting earnings of 47 cents per share on revenues of $2.53 billion. “We are pleased to report another quarter of strong results,” said Tom Folliard, president and chief executive officer. Comparable store used unit sales increased 6%, fueled by increased customer traffic. While traffic for the current quarter remained solidly above the prior year level, sales conversion dipped somewhat. We are especially pleased with our performance in light of recent economic and market challenges, including higher gas and vehicle prices, the uptick in the unemployment rate and the recent pull-back in consumer confidence. The Richmond, Virginia-based company is trading at 15.2 times forward earnings, which is not expensive for a company growing its earnings nearly 19% year-over-year. The company also said that it expects to open between eight and ten stores in the fiscal year ending February 28, 2013, indicating that there is still much room for expansion of its dealerships. In addition, CarMax is generating an 18% return on equity, sharply higher than competitor AutoNation AN. With these metrics and lower fuel prices this quarter as oil has fallen sharply from its highs, CarMax could speed up the gains in your portfolio.