CarMax (KMX) reported solid earnings and revenue beats for its fiscal third quarter early Thursday, as the used-car retailer continues a turnaround attempt. CarMax stock triggered a sell signal on Wednesday, then bolted sharply higher in Thursday’s premarket trade. Online auto sales rival Carvana (CVNA) also gained ground.
CarMax Earnings
The brick-and-mortar used-car seller reported earnings of 81 cents per share, a 56% gain. Revenue edged up 1%, besting estimates for a moderate decline. Previously, the company’s earnings and sales had declined in eight of the last 10 quarters.
Analysts had expected CarMax to post Q3 earnings of 62 cents per share on revenue of $6.047 billion, according to FactSet. Going into Thursday’s report, CarMax year-over-year earnings were seen rising 18.5%, despite a 1.6% drop in sales.
A statement from Chief Executive Bill Nash noted “solid execution and a more stable environment for vehicle valuations,” helping top drive the strong earnings against a modest sales gain.
↑
X
This Is How A New President Will Impact Fed Rate Cuts In 2025
In terms of other key metrics, analysts projected same-store-sales growth of 3% vs. a 4% decline a year ago. They anticipate 316 million unit sales for the quarter and gross profit per used vehicle of $2,282, rising slightly from a year earlier.
Analysts expect CarMax earnings to further quicken in Q4, jumping 70%. That includes the New Year’s Eve through New Year’s Day period, one of the best times of the year for buying used cars.
CarMax Stock, Carvana Sink On Fed Signal
Shares of CarMax sprung more than 7% higher in Thursday’s early stock market action. CarMax stock cleared a cup-with-handle buy point of 86.49 on Dec. 6. But it tumbled below support at its 21-day moving average on Wednesday afternoon, a good place for investors to sell and cut losses.
Carvana stock jumped almost 3%, implying a rebound from its 50-day moving average, after posting an 8% slip on Wednesday.
The Fed signaled a slower pace of rate cuts on Wednesday afternoon. Lower interest rates make used cars more affordable to consumers and make borrowing more palatable for companies.
When CarMax reports, investors will watch commentary around loan losses. CarMax Auto Finance reported declining income in eight of the last 10 quarters. The company blamed worsening auto loan losses across the industry.
Trump Wild Card
Further, President-elect Donald Trump’s tax and tariff policies are under watch, with retail seen as an especially vulnerable sector.
The rise of digital upstart Carvana (CVNA), which gave a bright outlook on Oct. 31, is weighing on CarMax as well.
CarMax’s previous second-quarter report showed some green shoots and potentially represented a turning point, Stephens analyst Jeff Lick wrote on Dec. 10. That includes growth in retail used-car unit sales and revenue.
A “substantial change” in CarMax’s growth and key metric is needed for shares to break above the 70-to-85 price range, Lick said.
Year to date, CarMax stock is up 8% on the back of a year-end rally.
Please follow Aparna Narayanan on X @IBD_Aparna for more coverage.
YOU MAY ALSO LIKE:
Best Growth Stocks To Buy And Watch: See Updates To IBD Stock Lists
Looking For The Next Big Stock Market Winners? Start With These 3 Steps
Join IBD Live And Learn Top Chart Reading And Trading Techniques From Pros
