CarMax (KMX) Drops 15% After a 'Horrendous' Earnings Report

CarMax (NYSE: KMX) shares are down about 17% in pre-market Thursday trading after the company delivered disappointing earnings.

The vehicle retailer reported a Q2 EPS of $0.79, a significant miss compared to the analyst estimate of $1.43. Revenue for the quarter came in at $8.1 billion, again lower by some margin compared to the consensus estimate of $8.61 billion.

The company said it plans to open 10 new stores in its 2023 fiscal year.

“As we navigate the near-term pressures facing our industry, we are further sharpening our focus on driving additional operational efficiencies across our business. We will also remain focused on continuing our work to achieve our long-term goals, including further improving our omnichannel experience for our customers and associates through enhancing the seamlessness of our online and in-store offerings and growing our diversified business model,” CarMax said in a statement.

RBC Capital analyst Steven Shemesh reiterated an Outperform rating and $108.00 price target on CarMax, saying the results were disappointing and reflective of a “continued challenging macro environment.”

“With consumer sentiment weakening, new car production picking up, and rates rising, the broader used vehicle industry is bound to remain pressured near term. Looking out longer term, we believe KMX’s steady reinvestment behind digital capabilities and consumer insights makes it one of the best positioned in the space to continue gaining share (KMX’s share of nationwide 0-10 year old vehicle share continued to increase through July – the latest period for which title data is available)."

For Vital Knowledge analysts, KMX delivered a “horrendous report”, which is likely to see echoes around the auto sector. Analysts remind investors that KMX’s bad report comes after the recent warning from Ford Motor (NYSE: F).

By Senad Karaahmetovic

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