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Buckingham Previews CarMax Earnings

Buckingham Research Group previewed CarMax, Inc. KMX 1.02% earnings, which is slated for Tuesday. The analysts maintained their Buy rating while keeping the price objective of $60 on shares.

The brokerage expects continued headwinds. The analysts think the quarterly financial numbers might be mixed, however, long-term growth drivers for the stock remain strong.

"We believe that factors which drove the flattish comp last quarter (F4Q16: +0.7%), while transitory in nature, were still in place and could pressure F1Q17 results. These factors include a difficult YoY comparison, an intensely promotional new car sales environment and a lack of SUV/pickup truck supply. Thus, comp store sales growth may be weak," the analysts wrote in a note.

The analysts think these factors were largely discounted in the stock, and thus could react favorably to even a minor enhancement in sentiment or fundamentals. Furthermore, as the brokerage believes the comp headwinds would abate over time and long-term growth factors remain intact, the analysts continue to recommend KMX shares.

As far as Buckingham is concerned, it expects CarMax to deliver revenue of $4.2 billion versus the consensus estimate of $4.2B and the first quarter of last year's $4.0 billion. Secondly, comparable store used vehicle sales change of 3.0% compared to fourth quarter of 2016 of up 70 bp. The brokerage expects EPS of $0.95 versus the consensus estimate of $0.93.

Shares of the company traded 2.19 percent up on Monday.

Apr 2016Deutsche BankMaintainsHold
Mar 2016Morgan StanleyMaintainsEqual-weight
Mar 2016Sterne Agee CRTDowngradesBuyNeutral

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