A month has gone by since the last earnings report for CarMax (KMX). Shares have added about 9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is CarMax due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the latest earnings report in order to get a better handle on the important drivers.
CarMax Q1 Earnings Beat Estimates
CarMax reported earnings per share of $1.31 for the first quarter of fiscal 2027, beating the Zacks Consensus Estimate of 94 cents by 39.61%. The bottom line declined 5.1% from $1.38 in the year-ago quarter.
Quarterly revenues rose 6.2% year over year to $8.01 billion, surpassing the consensus mark of $7.6 billion by 5.43%. Results benefited from higher retail and wholesale revenues, while combined retail and wholesale unit sales rose 3.3% to 392,357.
Sales Rise on Higher Vehicle Pricing
For the quarter ended May 31, 2026, CarMax’s total net sales and operating revenues were $8.01 billion, up from $7.55 billion a year ago. Used vehicle sales increased 4.7% to $6.39 billion, reflecting a higher average retail selling price.
Total retail used vehicle unit sales were nearly flat at 230,293 versus 230,210 in the prior-year quarter. Comparable-store used-unit sales declined 0.8%, as the company lapped a year-ago quarter that benefited from tariff-driven demand.
Wholesale Momentum Supports the Top Line
Wholesale vehicle sales rose 14% year over year to $1.43 billion. Wholesale unit sales increased 8.4% to 162,064, while the average wholesale selling price climbed 5.1% to $8,364.
The wholesale business helped offset pressure on retail profitability. Wholesale vehicle gross profit increased 8.3% to $169.5 million, with gross profit per wholesale unit of $1,046, essentially in line with $1,047 in the prior-year quarter.
Margins Face Pricing Pressure
Total gross profit declined 4.4% year over year to $854.4 million. Retail used vehicle gross profit fell 9.5% to $501.4 million, hurt by lower per-unit profitability.
Retail gross profit per used unit was $2,177, down $230 from last year’s all-time record due to the continuation of pricing actions aimed at driving an improved sales trend.
Cost Cuts Drive SG&A Leverage
Selling, general and administrative expenses decreased 3.7% year over year to $635.2 million. The decline was primarily driven by lower compensation and benefits costs as the company made progress on targeted SG&A reductions.
SG&A per total unit improved 6.8% to $1,619, down $118 from the year-ago quarter. CarMax remains on track to achieve $200 million in SG&A exit-rate savings by the end of fiscal 2027.
Finance Arm Expands Penetration
CarMax Auto Finance’s income was $140.2 million, down 1% from the year-ago quarter. The decline reflected lower auto loans outstanding following last year’s $900 million non-prime securitization, partly offset by interest earned on higher-margin receivables and servicing income.
CAF financed 43.3% of units sold after the impact of three-day payoffs, up 150 basis points year over year. The total interest margin percentage improved 20 basis points to 6.7%, while the weighted average contract rate was 11.3%, broadly in line with the prior-year quarter.
Focus on Growth Pillars
CEO Keith Barr introduced a four-pillar strategic framework focused on improving CarMax’s offering, simplifying the customer experience, adding value on each transaction and running lean. The company plans to share more details at a strategic update in late fall.
Pricing competitiveness, saleable inventory, digital-to-store conversion, CAF growth, EPP margin expansion, reconditioning efficiency and logistics improvements are key areas of focus for the company. The goal is to drive unit growth and earnings growth while supporting shareholder returns over time.
Balance Sheet Remains in Focus
CarMax ended the quarter with cash and cash equivalents of $132.2 million and inventory of $4.06 billion. Long-term debt excluding the current portion was $2.06 billion, while the current portion of long-term debt was $17.2 million.
The company did not repurchase shares during the first quarter. It had $1.31 billion remaining under its share repurchase authorization as of May 31, 2026, and intends to resume buybacks at an appropriate time depending on market conditions, leverage and capital needs.
How Have Estimates Been Moving Since Then?
Since the earnings release, investors have witnessed a upward trend in estimates revision.
VGM Scores
Currently, CarMax has a average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a score of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. It comes with little surprise CarMax has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
7 Best Stocks for the Next 30 Days
Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."
Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.9% per year. So be sure to give these hand picked 7 your immediate attention.
See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
CarMax, Inc. (KMX): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).