Bank of America Maintains CarMac at Buy, Reviews Solid 1Q

In a report published on Friday, Bank of America analyst John Murphy reiterated a Buy rating and a price target of $56 on CarMax KMX and reviewed 1Q results that were better than forecast.

In the report, Bank of America stated, "CarMax reported 1Q:14 EPS from continuing ops of $0.64, above our estimate of $0.52 and consensus of $0.58. 1Q marks yet another consecutive quarter of positive same-store growth, underscoring that improving new vehicle volume is a tailwind for KMX. The company posted +17% comps this quarter on volume, and results were further supported by strong income from CarMax Auto Finance (CAF), which came in at $87.0mm (BofAMLe $83.2mm). SG&A as a % of gross profit was 64.8% vs. our estimate of 70.0%, and declined YoY in terms of per- vehicle cost as KMX leveraged comp store used unit growth. KMX reiterated its plans to open 13 stores in FY14 and still plans to open 10-15 stores in FY15 & FY16. We continue to believe that store growth over the next several years along with a recovery in volumes should drive solid EPS growth."

CarMax closed on Thursday at $44.57.