CarMax (KMX) Crushes Estimates

We've been watching Carmax (KMX) as a potential position for a good 4-5 months now but unfortunately never pulled the trigger; these are impressive results especially considering Cash for Clunkers pulled away a good portion of potential buyers for about 5 weeks. (Carmax is mostly a used car dealer although there are some new cars in the mix) Second impressive quarter in a row. 36 cents of earnings even without the 10 cent one time charge.

Keep in mind year ago figures in almost every business are going to be VERY easy to compare to since the world was in hibernation while watching the US financial system nearly implode. So if we are going to rocket up stocks on nothing other than year over year comparisons October 2009 is going to be a wonderful month. It does appear analysts STILL are way behind the ball and since the stock market is all about "beating expectations", that should bode well for a lot of those. How much of that relatively obvious observation is already "priced in" is what is unknown.

• Car dealership chain CarMax Inc. said Tuesday its fiscal second quarter profit surged on higher sales and a one-time gain related to its auto financing business. The results topped Wall Street estimates and its shares jumped more than 10 percent in early trading.
• The Richmond, Va.-based company that predominantly sells used vehicles said it earned $103 million, or 46 cents per share, for the three months ended Aug. 31, compared with $14 million, or 6 cents per share, a year ago.
• The results included a net gain of 10 cents per share related to its financing division.
• Sales rose 13 percent to $2.08 billion from $1.84 billion in the same period last year. Sales at stores open at least a year rose 8 percent during the quarter.
• Analysts surveyed by Thomson Reuters, on average, expected a profit of 18 cents per share on $1.77 billion in revenue.
• While used cars didn't qualify under the federal Cash for Clunkers program that gave rebates for junking older cars and buying more fuel-efficient vehicles, Folliard said the summer program resulted in a spike in traffic in late July and August. (you're welcome)
• Used vehicle sales rose 9.6 percent, while new vehicle sales fell 18.5 percent, the company said. The average selling price of its used vehicles increased 5.6 percent, while gross profit per vehicle increased 13.4 percent to $2,120. (the last number is especially impressive)
• Expenses for the second quarter fell 3.1 percent to $218.1 million compared with the year-ago period due to lower advertising spending and efforts to curb store and corporate overhead costs, the company said. (read: chop, chop, chop) For the first half of the year, the company has lowered its expenses by 9.4 percent, or $43.8 million, compared with the year-ago period.
• Over the past year, the company has curtailed its store growth in response to the current economic environment, but has said it is committed to resuming its long-term plan of growing its store base at annual rate of about 15 percent.
• The company's auto financing arm reported income of $72.1 million compared with a loss of $7.1 million in the year-ago period, due in part to an increase in the value of bonds the company holds. In the year-ago period, CarMax saw adjustments related to loans that originated in prior fiscal years, mainly due to projected losses on defaulted loans.

[Jun 19, 2009: Carmax Roars on Earnings]

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