Is Carmax a Buy After Its Latest Earnings Report?

Impact · against what's priced in

The earnings report is not a catalyst for KMX as the volume growth and margin compression are exactly what the market expected from the current pricing strategy. The massive EPS beat is largely non-operational, and the continuing margin erosion reinforces the existing bearish risk that price cuts to defend volume will permanently damage profitability.

KMX+0.00

Already priced in

The price assumes

The Q1 earnings beat and the strategy of cutting used-car prices and expanding subprime lending to defend volume

The 13.8% increase in retail unit sales and the $111 drop in gross profit per unit confirm the strategy of sacrificing margins for volume that the market has already accepted.

What KMX's price assumes · Sep 5

• earnings
• KMX
• auto financing
• profit margins
• retail sales
• unit sales
• used cars

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