Why Used Vehicle Retailer CarMax Shares Are Surging Today

CarMax Inc KMX shares are trading higher Thursday morning after it reported a mixed bag of third-quarter FY24 earnings.

KMX reported a third-quarter sales decline of 5.5% year-on-year to $6.15 billion, missing the analyst consensus estimate of $6.33 billion.

"Our third quarter performance reflects the continued efforts of the team that have resulted in several quarters of sequential improvements across key components of our business, despite the persistent widespread pressures in the used car industry," said Bill Nash, president and chief executive officer.

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The company sold 302,666 units through combined retail and wholesale channels, an increase of 1.3% year-over-year.

KMX said vehicle affordability challenges continued to impact Q3 unit sales performance, as headwinds remained due to widespread inflationary pressures, higher interest rates, tightening lending standards and prolonged low consumer confidence.

Related: CarMax Faces Material Affordability Challenges, Says Analyst

Online retail sales accounted for 14% of retail unit sales, compared with 12% last year.

Total retail used vehicle unit sales declined 2.9%, and comparable store used unit sales declined 4.1%.

The company bought 250,000 vehicles from consumers and dealers, up 5.1% versus last year.

Gross profit was $612.9 million, a 6.3% increase year-over-year. EPS of $0.52 beat the consensus estimate of $0.44.

Selling, general and administrative expenses fell 5.4% year-over-year to $560 million. CarMax Auto Finance (CAF) income decreased 2.3% to $148.7 million.

KMX held cash and equivalents of $605.4 million as of November 30, 2023, plus restricted cash from collections on auto loans receivable of $483.57 million.

KMX repurchased 648,500 shares of common stock for $41.9 million in the quarter and had $2.41 billion remaining available for repurchase under the outstanding authorization as of November 30, 2023.

Outlook: During the fourth quarter, Carmax plans to open four stores, including two in the New York metro market and one in each of the Los Angeles and Chicago metro markets.

Also See: CarMax Likely To Report Higher Q3 Earnings; Here's A Look At Recent Price Target Changes By The Most Accurate Analysts

Price Action: CarMax shares were trading higher by 7.20% at $80.06 in premarket on Thursday.

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