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CarMax Beats on Both Top and Bottom Lines

By Seth Jayson – Updated Apr 10, 2017 at 12:58PM

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Just the facts, Fool.

CarMax (NYSE: KMX) reported earnings on June 21. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended May 31 (Q1), CarMax beat expectations on revenues and beat expectations on earnings per share.

Compared to the prior-year quarter, revenue grew significantly. GAAP earnings per share expanded significantly.

Gross margins shrank, operating margins increased, net margins expanded.

Revenue details
CarMax notched revenue of $3.31 billion. The 13 analysts polled by S&P Capital IQ hoped for revenue of $3.18 billion on the same basis. GAAP reported sales were 19% higher than the prior-year quarter's $2.85 billion.

Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.

EPS details
EPS came in at $0.64. The 15 earnings estimates compiled by S&P Capital IQ predicted $0.59 per share. GAAP EPS of $0.64 for Q1 were 23% higher than the prior-year quarter's $0.52 per share.

Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 15.7%, 30 basis points worse than the prior-year quarter. Operating margin was 7.2%, 10 basis points better than the prior-year quarter. Net margin was 4.3%, 10 basis points better than the prior-year quarter. (Margins calculated in GAAP terms.)

Looking ahead
Next quarter's average estimate for revenue is $3.10 billion. On the bottom line, the average EPS estimate is $0.55.

Next year's average estimate for revenue is $12.36 billion. The average EPS estimate is $2.17.

Investor sentiment
The stock has a four-star rating (out of five) at Motley Fool CAPS, with 935 members out of 1,028 rating the stock outperform, and 93 members rating it underperform. Among 344 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 333 give CarMax a green thumbs-up, and 11 give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on CarMax is outperform, with an average price target of $46.75.

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Seth Jayson had no position in any company mentioned here at the time of publication. You can view his stock holdings here. He is co-advisor of Motley Fool Hidden Gems, which provides new small-cap ideas every month, backed by a real-money portfolio. The Motley Fool recommends CarMax. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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