CarMax Inc ($KMX) Earnings (Q4 FY22)

 CarMax Inc ($KMX) Earnings and Opinion:


CarMax is a company in the Consumer Cyclical sector and operates in the Auto & Truck Dealerships industry. The company operates as a used car retailer in the United States. CarMax was founded in 1993 and is currently headquartered in Richmond, Virginia. The company was first traded on the stock market in 1997.

CarMax Inc EPS and Revenue (Q4 FY22):

  • EPS of $0.98 missing expectations of $1.28
  • Revenue of $7.7B beating expectations of $7.57B
  • EPS was down 22.8% (YOY) and Revenue was up 48.8% (YOY)
CarMax Inc EPS and Revenue (FY22):
  • EPS of $6.97 missing expectations of $7.30
  • Revenue was $31.9B beating expectations of $31.84B
  • EPS was up 54.2% (YOY) and Revenue was up 68.3% (YOY)
CarMax Inc Future Outlook:
  • 10 new store openings in 2023 fiscal year
  • Increase capital spending to reach long-term goals
  • Generate between $33B and $45B in revenue by 2026 fiscal year
Opinion:
CarMax stock is currently getting hammered during todays trading session after reporting earnings before the opening bell this morning. Investors saw this report as a negative for the company as EPS expectations were way higher than what the company reported. However, revenue came in at a pretty good level and the full fiscal year revenue also beat expectations as well. The company also provided an outlook for the next couple years by setting some important goals. They also want to increase consumer spending in order to achieve these goals and continue to grow the business. CarMax has plans to open 10 new stores during this upcoming fiscal year and wants to achieve higher yearly revenue totals by 2026 or earlier. I can see some potential with this company with the way the revenue rates are growing, however we have to put this in perspective. With used car prices selling for absurd prices and levels that are unheard of, we can see why this business has been able to bring in the revenues it has. When you look at this from a long-term perspective, I can see inflation going to the way side and price levels especially for used cars coming back down to normal prices. This is going to cause CarMax to have to sell more cars to make up for these price decreases. Only time will tell when that will happen though, for now the company needs to keep doing what it is doing and it will continue to bring in some solid revenues. Looking at the valuation perspective of the company, we can see it only has a profit margin of 3.92% and an operating margin of 5.3%. These are relatively low compared to industry averages, so I would like to see these increase a bit. When we turn to their cash and debt, we can see that they burn a lot of cash, and have a lot of debt piled up. This is a turnoff for investors and I feel like they need to set some cash aside to start building it up. Personally, I am going to stay away from this stock right now. I see a lot better options in this sector and they will gain more returns than you will get from this company. I feel CarMax has a lot of work to do with their company, but hopefully they can prove me wrong and make necessary changes. 


*Information from CarMax, Yahoo Finance, and Nasdaq
*Estimates attained from Zacks

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