Used-Car Retailer CarMax Q4 Sales to Grow 4%, Earnings to Fall

The United States’ largest used-car retailer U.S. CarMax is expected to report its fourth-quarter earnings of $1.25 per share, which represents a year-over-year decline of about 4% from $1.30 per share seen in the same quarter a year ago; however, sales will likely grow 4% year over year.

For the 2021 fiscal year, CarMax is expected to post an EPS of $4.50, down from $5.33, on sales of $18.94 billion. According to ZACKS Research, the used-car retailer’s fourth-quarter earnings is pegged at $1.27 cents on revenues of $5.15 billion.

CarMax shares, which rose more than 7% in 2020, surged over 42% so far this year.

CarMax Stock Price Forecast

Five analysts who offered stock ratings for CarMax in the last three months forecast the average price in 12 months of $135.00 with a high forecast of $140.00 and a low forecast of $130.00.

The average price target represents a 0.64% increase from the last price of $134.14. Of those five analysts, four rated “Buy”, one rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $165 with a high of $250 under a bull scenario and $63 under the worst-case scenario. The firm gave an “Overweight” rating on the used-car retailer’s stock.

Several other analysts have also updated their stock outlook. JP Morgan raised the target price to $115 from $110. Guggenheim lifted the target price to $143 from $117. Bank of America reduced their price target to $121 from $130 and set a “buy” rating. Argus raised their price target to $110 from $105. Oppenheimer issued a “buy” rating and a $130 target price for the company.

Analyst Comments

“Based on historical & current data, we expect to see strength in used car sales as we move forward, particularly given the shortage of new car inventory, manufacturers pulling back on incentives, and potential tailwinds from de-urbanization, mass transit, ride-sharing, and travel. We expect CarMax (KMX) to successfully execute their Omnichannel strategy, providing both online and physical dealer options to consumers,” noted Adam Jonas, equity analyst at Morgan Stanley.

“CarMax (KMX) has consistently generated profitability and has one of the strongest balance sheets amongst the dealers. Long term, we estimate strong growth in same-store sales along new store openings, allowing KMX to achieve operating leverage, with upside from the omnichannel rollout.”

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