CarMax Remains Neutral - Analyst Blog
13 Março 2013 - 2:20PM
Zacks
On Mar 11, we maintained our Neutral recommendation on
CarMax Inc. (KMX), based on its aggressive store
expansion strategy and focus on the used-vehicle market, despite
lower margins from used vehicle sales owing to the aggressive
incentives offers by manufacturers and dealers.
Why Maintained?
CarMax reported a 13.9% rise in earnings per share to 41 cents in
the third quarter of fiscal 2013 ended on Nov 30, 2012 from 36
cents per share in the year-ago quarter. The EPS surpassed the
Zacks Consensus Estimate by 2 cents. Profits escalated 15.3% to
$94.7 million from $82.1 million in the year-ago quarter.
The company’s net sales and operating revenues for the quarter
climbed 15.1% to $2.6 billion from $2.3 billion in the third
quarter of fiscal 2012. Revenues also beat the Zacks Consensus
Estimate of $2.5 billion.
Following the release of the third quarter results, the Zacks
Consensus Estimate for fiscal 2013 increased 0.5% to $1.87 per
share. The Zacks Consensus Estimate for fiscal 2014 also went up by
the same magnitude to $2.06 per share.
CarMax focuses more on the used-car market, which helps to outgrow
its peers. CarMax is one of the strongest operators with leading
liquidity and profitability ratios among the other automotive
retail companies including Penske Automotive Group
Inc. (PAG) and AutoNation Inc. (AN).
CarMax undertook aggressive store expansion policy based on the
improving sales environment in the U.S. In the first nine months of
fiscal 2013, CarMax has opened 8 superstores and plans to open
around 10 more superstores in fiscal 2013.
However, we are concerned about the sluggish sales environment for
new vehicles particularly for domestic cars. The margins on used
vehicle sales were adversely affected by incentives and attractive
pricing offered by the manufacturers and dealers for the new cars.
High used car inventory is also putting pressure on the prices,
thus affecting the margins. In addition, the used-car market in the
U.S. is highly fragmented and competitive.
Other Stocks to Look For
O'Reilly Automotive Inc. (ORLY) is performing well
in the industry where CarMax operates. O'Reilly is a Zacks Rank #1
(Strong Buy) stock.
AUTONATION INC (AN): Free Stock Analysis Report
CARMAX GP (CC) (KMX): Free Stock Analysis Report
O REILLY AUTO (ORLY): Free Stock Analysis Report
PENSKE AUTO GRP (PAG): Free Stock Analysis Report
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