Please ensure Javascript is enabled for purposes of website accessibility

Why CarMax Inc. Jumped 12.9% in September

By Joe Tenebruso - Oct 12, 2017 at 10:33AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The used-car seller's "no-haggle" approach continues to resonate with car shoppers.

What happened

Shares of CarMax (KMX 2.42%) jumped nearly 13% last month, according to data provided by S&P Global Market Intelligence, following the used-car retailer's strong second-quarter results.

So what

CarMax's revenue rose 9.7% year over year to $4.39 billion. Net income leapt 11.7% to $181.4 million. And earnings per share, boosted by stock buybacks, jumped 16.7% to $0.98.  Those figures came in well above Wall Street's expectations of $4.27 billion in revenue and $0.95 in EPS.

CarMax used car lot

Image source: CarMax.  

CarMax sold 5.3% more cars on a comparable-store basis and 11.1% more on an overall basis. Used-vehicle gross profit per unit increased to $2,178, compared to $2,160 in the year-ago quarter. More cars sold and higher profit per vehicle -- that's a powerful combination that's helping to fuel CarMax's results.

Now what 

CarMax has a unique value proposition in the used-car industry. The company takes something that's dreaded by many car shoppers -- the intense negotiating that's often required as part of the typical used-car buying experience -- and eliminates it. The "no-haggle" price for a CarMax vehicle is the same online as it is on the lot. All of its cars are quality certified and come with a five-day money-back guarantee. Together, these features make shopping at a CarMax a much less stressful, and even enjoyable, experience for many used car buyers.

In turn, CarMax should continue to take share in the used-car industry. The company plans to open 15 new stores over the next 12 months. The company's national expansion strategy, combined with growing comp sales at its existing 180-strong store base, should drive steady increases in revenue and earnings for many years to come.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

CarMax Inc. Stock Quote
CarMax Inc.
$92.67 (2.42%) $2.19

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/03/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.