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What Happened in the Stock Market Today

By Jim Crumly - Sep 24, 2019 at 4:59PM

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CarMax reported a strong quarter, but AutoZone had mixed results.

News of an impending impeachment inquiry sent jitters through the market today and major benchmarks fell. The Dow Jones Industrial Average ( ^DJI 1.40% ) and the S&P 500 ( ^GSPC 2.07% ) opened in positive territory but moved down during most of the session. The defensive utility sector rose, but energy, biotechnology, and internet stocks were particularly weak.

Today's stock market

Index Percentage Change Point Change
Dow (0.53%) (142.22)
S&P 500 (0.84%) (25.18)

Data source: Yahoo! Finance.

Two automobile stocks released earnings this morning, with CarMax ( KMX 3.74% ) announcing a strong quarter and AutoZone ( AZO 7.64% ) reporting mixed results.

Columns of numbers and downward arrow.

Image source: Getty Images.

CarMax beats expectations

CarMax delivered better-than-expected revenue and profit in its fiscal second quarter, but shares closed down 0.2%. Net sales and operating revenue increased 9.1% to $5.2 billion, well above expectations of $5.05 billion. Earnings per share grew 12.9% to $1.40, compared with the analyst consensus of $1.33.

The used-car dealer built on strong sales gains last quarter by reporting a 6.2% increase in used-car unit sales and 3.2% growth in comparable-store unit sales. Wholesale vehicle unit sales rose 4.7%, and income from CarMax Auto Finance grew 4.1%.

CarMax officials spent much of the conference call updating analysts on the rollout of its omnichannel strategy, which smooths the transition between online interactions and physical stores, including features such as delivery of test drive vehicles to the customer. Though CarMax believes the model to be more efficient in the long term, it said it expects inefficiencies in the short term as the program is implemented.

CarMax continues to buy back stock aggressively, with shares outstanding shrinking 6.1% from the period a year earlier.

Commercial business growth squeezes AutoZone profits

AutoZone reported sales that beat expectations but disappointing profit, and shares slid 4.4%. Net sales were $4 billion, an increase of 12.1% over last year, in part because of an extra week in the quarter. Excluding the extra week, sales were up 5.4%, and domestic same-store sales rose 3%. Adjusted earnings grew 13% to $20.95 per share. Wall Street was expecting the car parts dealer to earn an adjusted $21.80 per share on net sales of $3.93 billion.

Profit in the quarter was hurt by a rise in wages and a shift in the sales mix. The increase in the domestic store payroll lopped 58 basis points off the company's operating margin, while acceleration of AutoZone's commercial business, which has lower margins than its retail business, hurt the growth of gross profit.

CEO William Rhodes said in the conference call that he expects continued pressure on gross margin as the commercial business grows, and doesn't foresee a repeat of the company's streak of 41 straight quarters of double-digit EPS growth, a statement which may have put pressure on the stock of this recession-resistant business today.

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Stocks Mentioned

AutoZone, Inc. Stock Quote
AutoZone, Inc.
AZO
$2,023.57 (7.64%) $143.58
CarMax Inc. Stock Quote
CarMax Inc.
KMX
$149.91 (3.74%) $5.41
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$35,719.43 (1.40%) $492.40
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$4,686.75 (2.07%) $95.08

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

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