Investors have paid a lot of attention to macroeconomic data lately, and Wednesday morning's release of March inflation data has become the focal point in the future direction of the stock market. That largely had investors in wait-and-see mode Tuesday morning, with stock index futures little changed in the run-up to the beginning of trading at 9:30 a.m. ET.
Beyond economic data, though, the imminent beginning of first-quarter earnings season is also vying for its place in the spotlight. CarMax (KMX 0.54%) and Adtran (ADTN -3.06%) gave investors some information about how their respective quarters went, and the two stocks moved in opposite directions as shareholders reacted. Below, you'll see how the two companies are faring and what it might mean for earnings releases later this week.
CarMax hits the gas
Shares of CarMax rose 6% in premarket trading on Tuesday morning. The retailer of mostly used vehicles reported fiscal fourth-quarter financial results for the period ended Feb. 28, and while they weren't exactly strong, they held up somewhat better than many had feared.
CarMax's financial numbers showed the pullback after extremely strong years in the recent past. Revenue of $5.7 billion was down 26% year over year as the car retailer closed the fiscal year with a 7% drop in annual sales. CarMax saw pressure both in retail and wholesale activity, as retail units sold dropped 13% while wholesale units fell 19%. Quarterly earnings of $0.44 per share plunged by more than half from the year-ago period.
However, investors were pleased to see profit margins show signs of rebounding. On the retail side, gross profit per unit sold came in at $2,277, up $82 from the period 12 months ago. For its wholesale business, gross profit was relatively flat at $1,187 per unit.
Moreover, CarMax remains optimistic that it will be able to sell between 2 million and 2.4 million vehicles and generating between $33 billion and $45 billion by fiscal 2026. With the goal of growing nationwide market share in the used vehicle market to more than 5% by the end of calendar 2025, CarMax has investors thinking that the stock could continue to pick up momentum from current levels even as other dealers struggle.
Adtran falls short
Elsewhere, shares of Adtran plunged more than 20% in premarket trading. The networking and communications solutions provider reported preliminary results for the first quarter that were quite a bit below what it had previously projected.
Adtran said it believes revenue will be between $322 million and $326 million in the first quarter. That's substantially less than the $355 million to $375 million range that it had provided previously. Adtran blamed the shortfall on customer inventory corrections that had a direct impact on its subscriber solutions product line. Also, Adtran faced supply constraints that stopped it from making as much of its products as customers wanted.
Moreover, CEO Tom Stanton said that oversupply in its inventory of equipment intended for installation on customer premises is likely to continue into the second quarter. The executive is hopeful that these impacts will be transitory and improve during the quarter, but Adtran expects to make some expense adjustments in order to adapt to current conditions.
Adtran expects that its long-term opportunity to take advantage of ongoing fiber network upgrades worldwide remains intact. However, investors aren't pleased to have to deal with a negative operating margin during a tough period for the industry.
