Tic-tac-toe, investors want to know: After turning in two consecutive "earnings beats," can auto superstore CarMax (NYSE:KMX) make it three in a row with its fiscal Q3 2007 report on Wednesday?

What analysts say:

  • Buy, sell, or waffle? Ten analysts follow CarMax. Eight of them say to hold the stock, while one says buy and one says sell.
  • Revenues. On average, analysts expect CarMax to report $1.63 billion in sales, up 14% from last year.
  • Earnings. Profits, in contrast, are predicted to remain flat at $0.25 per share.

What management says:
Reviewing CarMax's fiscal Q2 performance three months ago, I summed it up thusly: "It's hard to argue that the company had anything but a fantastic quarter." Sales were up 18%; unit comps, 7%; and profits per diluted share rose 44%. All of which convinced CEO Tom Folliard to raise guidance for the full fiscal year. At last report, CarMax is expecting unit comp growth of 6% to 8%, 23% to 31% profits growth, and a grand total of $1.55 to $1.65 in profits per share for the year.

But wait -- it gets better (or could). Folliard qualified that at-the-time optimistic scenario by cautioning that: "Our revised expectations assume that we don't experience abnormal winter weather events." One presumes that was Folliard's euphemism for winter storms that might snow in potential car buyers. But considering the unusually balmy winter we've been experiencing so far, a Fool has to wonder whether CarMax perhaps benefited from "abnormal[ly warm] winter weather" in Q3.

What management does:
Take the potential for greater-than-expected sales, and combine it with the margin trends we've been seeing at CarMax (gross, operating, and net margins are all rising pretty steadily), and I wouldn't be knock-me-over-with-a-feather surprised if CarMax beats estimates.

Margins %

5/05

8/05

11/05

2/06

5/06

8/06

Gross

13.7

13.8

14.0

14.1

14.2

14.4

Op.

3.5

3.6

3.7

3.8

4.2

4.5

Net

2.0

2.1

2.1

2.3

2.5

2.6
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
I wasn't the only Fool impressed with CarMax's performance last quarter. Inside Value lead analyst Philip Durell, who has recommended the stock to subscribers, termed it "another blowout quarter" in his September update. What's more, Philip continued: "I believe that CarMax's success has a long way to run."

Then again, it was $8, or 20%, ago that Philip said that. Want to know what he thinks of the stock today? Take a free trial of Inside Value and you'll not only be privy to what he thinks the stock is worth, you'll also get his best advice on how much of a margin of safety to demand in your bid price.

Competitors:

  • America 's Car-Mart (NASDAQ:CRMT)
  • AutoNation (NYSE:AN)
  • Group 1 Automotive (NYSE:GPI)
  • United Auto Group (NYSE:UAG)

What did we expect from CarMax last quarter, and what did we find when we popped the trunk? Find out in:

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Fool contributor Rich Smith has no interest, short or long, in any company named above. The Fool has a disclosure policy.