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Here's Why Shares of CarMax Are Accelerating on Friday

By Lou Whiteman – Updated Apr 17, 2019 at 12:04PM

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Q4 was strong for this still-growing and -adapting auto retailer.

What happened

Shares of CarMax (KMX -0.09%) traded up more than 10% on Friday after the used-car retailer reported fiscal fourth-quarter earnings that beat expectations.

So what

On Friday before markets opened, CarMax reported fourth-quarter earnings of $1.13 per share, ahead of the $1.06 consensus estimate. The company did report revenue, at $4.32 billion, that was a bit below the $4.43 billion that analysts had expected but said that total used-vehicle sales increased by 5.6% year over year, and comparable-store used sales were up 2.8%.

A man takes car keys from a salesperson.

Image source: Getty Images.

The company delivered in the quarter on some key investor metrics. Gross profit per used vehicle was up slightly to $2,166, wholesale vehicle unit sales were up 3.7%, and gross profit per unit climbed $31 to $977. CarMax was able to lift its "other sales and revenues" segment by 15% from a year prior thanks to strong sales of its extended protection plans and third-party financial fees.

CarMax said the results could have been even better if not for delays in tax refunds stemming from the government shutdown and new tax laws.

Check out the latest earnings call transcripts for the companies we cover.

Now what

CarMax is still in investment mode, saying it expects capex to increase to $350 million in 2020 from $304.6M in fiscal 2019 as it opens more than a dozen additional stores. CEO Bill Nash also said CarMax is "pleased with the response" to its omnichannel rollout, which allows customers to completely buy a vehicle online or choose to come into the store.

Shares of CarMax had been flat over the past year prior to Friday's run-up. In the quarter, CarMax repurchased 4.4 million shares, but it still has more than $2.1 billion in authorized funds available for future repurchases.

Investors need to watch auto demand closely, but CarMax has proven it can weather the cycle. Its latest results provide fresh evidence the company is able to adjust in a highly competitive market.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends CarMax. The Motley Fool has a disclosure policy.

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