CarMax Beats Q2 Estimates with $1.16 EPS and $7.88B Revenue

CarMax (KMX) reported fiscal second-quarter GAAP earnings of $1.16 per diluted share, beating the consensus estimate by $0.43, on revenue of $7.88 billion, which topped estimates by $850 million . Per the company's earnings release, total net revenues rose 19.5% from $6.59 billion a year earlier, and EPS rose 81.3%. Consensus figures vary by provider: Zacks' survey of eight analysts had expected 68 cents a share.

Volume drove the quarter. Combined retail and wholesale used unit sales reached 387,735, up 14.7%, with retail used units up 13.8% and comparable-store used units up 13.0%. CarMax Auto Finance income climbed 32.1% to $135.6 million. CEO Keith Barr credited "early progress against Shift into GEAR," the four-pillar plan meant to return the company to sustained growth.

The trade-off sits in per-unit profitability. Retail used vehicle gross profit per unit fell $111 year over year to $2,105, and wholesale gross profit per unit fell $135 to $858, which coverage attributed to pricing actions taken to support sales. In other words, CarMax gave up some margin on each car to win back volume, and this quarter the volume more than made up for it.

What to watch: whether unit growth holds as the company laps easier comparisons, whether per-unit gross profit stabilizes, and the resumption of share buybacks, which CarMax plans for the third quarter with $1.31 billion remaining under its authorization.