Key Highlights
- Shares of CarMax gained approximately 3.5% during premarket hours following a better-than-anticipated fiscal Q2 performance.
- The company delivered adjusted earnings of $1.16 per share, significantly surpassing the analyst consensus of 73 cents.
- Total revenue increased 20% year-over-year to reach $7.9 billion, exceeding FactSet’s consensus projection of $7.09 billion.
- While gross profit per used retail unit decreased to $2,105, it still outperformed Wall Street’s forecast of $2,022.
- The retailer announced plans to restart its share repurchase program at a conservative pace during fiscal Q3.
CarMax stock gained ground on Tuesday following the used vehicle dealer’s impressive fiscal second quarter results. In premarket activity, shares jumped 3.5% to reach $58.50, extending what has been a strong year of performance relative to major indices.
For the quarter that concluded on August 31, the Richmond-based company delivered adjusted earnings of $1.16 per share. This represented a substantial increase from the 64 cents reported in the same period last year and significantly exceeded the 73-cent consensus forecast from Wall Street analysts.
Total revenue climbed 20% compared to the prior year period, reaching $7.9 billion. This performance comfortably topped the $7.09 billion consensus estimate gathered by FactSet.
The company recorded net income of $165.3 million for the quarter, a notable improvement from the $95.4 million posted twelve months earlier. Calculated on a per-share basis, this translates to $1.16 compared with 64 cents in the year-ago period.
Unit Economics and Sales Volume Trends
The company generated gross profit of $2,105 per used retail vehicle, representing a decline from the $2,216 achieved in the comparable quarter last year. However, this metric still exceeded Wall Street’s expectation of $2,022.
CarMax explained that the margin compression reflects a deliberate strategic shift toward pricing that emphasizes volume growth over per-unit profitability. The approach seems to be delivering results in terms of unit throughput.
Total used vehicle unit sales, including both retail and wholesale channels, increased 15% to 387,735 units. Retail used vehicle sales specifically rose 13.8% to 227,391 units.
Elevated interest rates combined with limited inventory of affordable used vehicles have constrained demand from many potential customers. According to data from Cox Automotive, vehicles in the under-$15,000 price segment had only 29 days of available supply, considerably below typical industry levels.
This inventory scarcity has created challenges for dealers attempting to serve budget-conscious shoppers. CarMax seems to have mitigated some of these headwinds by emphasizing sales volume rather than margin preservation.
Share Repurchase Program Resumption Ahead
The company refrained from executing any stock buybacks during the most recent quarter. However, this pause is expected to end soon.
Management disclosed in its earnings announcement that it intends to restart share repurchases “at a modest level” when the fiscal third quarter begins. The decision was attributed to the company’s solid second quarter results, sustained positive momentum, and strengthening balance sheet metrics.
Analysts had been divided regarding whether CarMax’s business recovery was genuinely taking hold. Sentiment began shifting more positively following the company’s fiscal first quarter earnings release in June.
Tuesday’s quarterly report reinforced the improving outlook. The announcement of returning to buyback activity was interpreted as an additional indicator that leadership has increased confidence in the company’s trajectory.
Other players in the used vehicle space showed mixed performance during the session. Carvana edged up 0.2%, AutoNation remained unchanged, and Group 1 Automotive rose 0.3%.
Since reporting fiscal first quarter earnings on June 17, CarMax stock has climbed 8.5%. Year-to-date, shares have surged 46%, substantially outperforming the S&P 500’s 12% gain during the same timeframe.
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