On Sept. 19, CarMax (NYSE:KMX) released second-quarter earnings for the period ended Aug. 31.

  • Total sales increased 10% to $2.1 billion but missed expectations, as new vehicle unit sales slipped 15% in the quarter. Comps edged ahead by a lackluster 3%.
  • Despite the sales miss, CarMax managed to meet earnings forecasts, earning $65 million, or $0.29 per share.
  • As a result of the poor first half, CarMax slashed its full-year outlook across the board, lowering earnings, comps, and total sales estimates. However, it feels these problems result from the market, rather than its operations, so it will continue adding stores at a rate of 15% to 20% annually.
  • CarMax has received a three-star rating (out of a possible five) in Motley Fool CAPS. Competitors America's Car-Mart (NASDAQ:CRMT) and Penske Auto Group (NYSE:PAG) earn two and three stars, respectively. Cruise on over to the CAPS community and share your opinion on these and thousands more stocks.

(Figures in millions, except per-share data.)

Income Statement Highlights

Q2 2007

Q2 2006

Change

Sales

$2,122.5

$1,929.5

10%

Net Profit

$65.0

$54.3

19.8%

EPS

$0.29

$0.25

16%

Diluted Shares

220.6

215.3

2.5%

Get back to basics with the income statement.

Margin Checkup

Q2 2007

Q2 2006

Change*

Gross Margin

13.6%

13.1%

0.4

Operating Margin

5.1%

4.5%

0.6

Net Margin

3.1%

2.8%

0.2

*Expressed in percentage points

Margins are the earnings engine.

Balance Sheet Highlights

Assets

Q2 2007

Q2 2006

Change

Cash + ST Invest.

$7.6

$23.8

(68.1%)

Accounts Rec.

$56.2

$66.7

(15.8%)

Inventory

$820.2

$734.4

11.7%

Liabilities

Q2 2007

Q2 2006

Change

Accounts Payable

$248.8

$190.2

30.8%

Long-Term Debt

$27.4

$34.3

(20.2%)

The balance sheet reflects the company's health.

Cash Flow Highlights

YTD 2007

YTD 2006

Change

Cash from Ops

$168.0

$86.8

93.5%

Capital Expenditures

$132.1

$54.3

143.3%

Free Cash Flow

$35.9

$32.5

10.5%

Free cash flow is a Fool's best friend.

Related Foolishness:

Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check Fool.com for more of our in-depth discussion of what the numbers mean.

At the time of publication, Fool contributor Mike Cianciolo held no position in any of the companies in this article. CarMax is an Inside Value recommendation. The Motley Fool has a disclosure policy.