Shares of used-car megastore chain CarMax (KMX +2.07%) tumbled 15.6% through 1 p.m. ET Tuesday, despite beating on both the top and bottom lines in its Q4 2026 earnings report this morning.
Heading into the report, analysts forecast CarMax to earn $0.18 per share, non-GAAP, on sales of $5.65 billion. CarMax actually earned $0.34 per share on sales of $5.95 billion.
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CarMax Q4 earnings
CarMax sold 0.7% fewer vehicles retail last quarter, and 3% more wholesale, resulting in a 1% decline in total revenue -- an improvement from the 1.8% decline for all of fiscal 2026.
Profitability suffered, with gross profit falling more than 9%. On the bottom line, the company reported a non-GAAP loss (as noted above), but its earnings calculated under generally accepted accounting principles (GAAP) were negative -- an $0.85 per share loss for the quarter, the opposite of what one would expect with non-GAAP profit being reported as positive, and thus perhaps a shock to investors.
Full-year, CarMax still booked a GAAP profit of $1.68 per share, however, this was barely half the $3.21 per share the company earned in fiscal 2025.
KMX CarMax
NYSE · As of 2:57 PM ET 10/26/26
What's next for CarMax stock
Worse news for investors is that CarMax says it is cutting prices to spur sales growth, which may help the company beat analyst forecasts for near-zero sales growth this year -- but could weigh on future profits. Given that analysts were already anticipating earnings would decline in fiscal 2027, it appears the company's price-cutting strategy could result in an even steeper-than-expected earnings decline.
Granted, the stock doesn't look terribly expensive today at a P/E ratio of 16. Without earnings growth, though, even a mid-teens P/E ratio might be too much to pay for CarMax stock.
