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CarMax (KMX) Q4 Earnings and Revenues Beat Estimates

CarMax Inc. KMX posted earnings per share of 74 cents in the fourth quarter of fiscal 2016; ended Feb 29, 2016, highlighting an increase of 13.8% from 65 cents earned a year ago. Earnings also outpaced the Zacks Consensus Estimate of 71 cents.
 

Net sales and operating revenues in the reported quarter rose 5.5% year over year to $3.71 billion, also surpassing the Zacks Consensus Estimate of $3.68 billion.

Used vehicle revenues appreciated 6.5% to $3.1 billion in the reported quarter, driven by higher unit sales. Unit sales of used vehicles increased 4% to 155,237 vehicles and the average selling price rose 2.4% to $19,758. Comparable-store used vehicle unit sales inched up 0.7% in the quarter on improved conversion and better execution by store teams.

Wholesale vehicle revenues increased 2.9% to $506.1 million in the quarter. Unit sales rose 2.3% to 92,219 vehicles; the improvement was driven by growth in store base. Average selling price of wholesale vehicles went up 0.2% to $5,267.

Other sales and revenues decreased 8.5% to $112.1 million. Extended protection plan (“EPP”) revenues grew 4.5% to $70.4 million.

Gross profit improved 2.8% to $489.3 million from $475.8 million in the year-ago quarter.

Fiscal 2016 Performance

CarMax reported a year-over-year rise of 13.5% in earnings to $3.03 per share for fiscal 2016 which beat the Zacks Consensus Estimate of $2.97. Revenues for fiscal 2016 increased 6.2% to roughly $15.15 billion from $14.27 billion in fiscal 2015. The figure also marginally surpassed the Zacks Consensus Estimate of $15.13 billion.

CarMax Auto Finance (CAF)

CAF reported a 2.2% increase in income to $92.3 million in fourth-quarter fiscal 2016 from $90.4 million a year ago. The improvement was primarily driven by an increase in average managed receivables, partially offset by a lower interest margin.

Store Openings

During the fourth quarter of fiscal 2016, CarMax opened five stores including three stores in new markets (two in Boston and one in Peoria/Bloomington) and the remaining two in existing markets (one in Atlanta and the other in St. Louis). In fiscal 2016, the company opened 14 stores and relocated 1 store. As of Feb 29, 2016, CarMax operates 158 used car stores.

In fiscal 2017, the company plans to open 15 stores. The company also intends to open 13–16 superstores in each of the next two fiscal years.

Share Repurchase Program

During the quarter under review, CarMax spent $155.8 million to repurchase 3 million shares under its existing share buyback program. In fiscal 2016, the company repurchased 16.3 million shares for $971.2 million. As of Feb 29, 2016, the company had $1.4 billion of authorization remaining under its share repurchase program.

Financial Position

CarMax had cash and cash equivalents of $37.4 million as of Feb 29, 2016, up from $27.6 million as of Feb 28, 2015. Total debt rose to $715.4 million as of Feb 29, 2016, from $310.8 million as of Feb 28, 2015.

In fiscal 2016, CarMax had a cash outflow of $148.9 million from operations, compared with $968.1 million in the prior-year period. Capital expenditures totaled $315.6 million in fiscal 2016, up from $309.8 million a year ago. Meanwhile, the company projects capital expenditures of around $450 million for fiscal 2017.

Zacks Rank

CarMax currently carries a Zacks Rank #4 (Sell).

Some better-ranked automobile stocks include Federal-Mogul Holdings Corporation FDML, Cooper Tire & Rubber Co. CTB and Superior Industries International, Inc. SUP. All the three stocks sport a Zacks Rank #1 (Strong Buy).

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CARMAX GP (CC) (KMX): Free Stock Analysis Report
 
SUPERIOR INDS (SUP): Free Stock Analysis Report
 
FEDERAL MOGUL-A (FDML): Free Stock Analysis Report
 
COOPER TIRE (CTB): Free Stock Analysis Report
 
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