Why CarMax Earnings Were Not Enough for Investors

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CarMax Inc. (NYSE: KMX) reported its fiscal third-quarter financial results before the markets opened on Thursday. While the numbers were more or less in line with what analysts were calling for, it seems that investors wanted more from this company in the hurricane season.

The auto dealer said that it had $0.81 in earnings per share (EPS) on $4.11 billion in revenue. This compares with the consensus estimates from Thomson Reuters of $0.81 in EPS and revenue of $3.97 billion. The same period of last year reportedly had EPS of $0.72 and $3.7 billion in revenue.

During this quarter, used unit sales in comparable stores increased 2.7% and total used unit sales rose 8.2%. The comparable store sales performance reflected an increase in conversion, partially offset by lower store traffic. CarMax was able to leverage its national footprint and nationwide transportation network to quickly transfer vehicles into hurricane-affected markets, and these stores drove third-quarter comparable store unit sales growth.

Separately, total wholesale unit sales increased by 9.1%. This reflected a substantial increase in its appraisal buy rate and the growth in the store base. The firm believes the appraisal buy rate benefited from strong wholesale industry vehicle valuations.

In terms of the numbers, used vehicles sold during the quarter totaled 169,648 and wholesale vehicles totaled 100,332. Both of these numbers are up from 156,789 and 91,973, respectively, in the same period from last year.

CarMax Auto Finance (CAF) income increased 15.1% to $102.8 million.

On the books, CarMax cash and cash equivalents totaled $26.29 million at the end of the quarter, compared with $23.71 million in the same period from last year.

Shares of CarMax traded down about 4% at $65.56 on Thursday, with a consensus analyst price target of $76.50 and a 52-week range of $54.29 to $77.64.