CarMax Shares Dip On Disappointing Q4 Earnings: Analysts Adjust Expectations

Zinger Key Points
  • CarMax gained market share in 3 of 5 months, starting in October, one analyst said.
  • There is reduced confidence around the company’s unit recovery in the near term, another analyst added.

Shares of CarMax Inc KMX were falling in early trading on Friday, after the company reported downbeat earnings for its fiscal fourth quarter.

The results came amid an exciting earnings season. Here are some key analyst takeaways from the release.
Needham On CarMax

Analyst Chris Pierce reiterated a Buy rating, while reducing the price target from $99 to $91.

Hopes of an industry recovery have been pushed out due to expectations of Federal Reserve delays interest rate cuts, “putting the burden of growth on share gains,” Pierce said in a note.

CarMax gained share in three of the five months, starting in October, the analyst stated. “A linear path to share gains would clearly be preferable, but we view recent results as thesis confirming,” he added.

Check out other analyst stock ratings.

RBC Capital Markets On CarMax

Analyst Steven Shemesh reaffirmed an Outperform rating, while lowering the price target from $83 to $73.

The company’s fourth-quarter results were “noisy,” Shemesh said. Although there was an improvement in retail comp units, the performance quarter to date is “trending down,” pushing out the long-term unit target, he added.

“It’s tough to have much conviction in a near-term unit recovery – which we think is needed to really drive leverage throughout the model,” the analyst further wrote.
Mizuho Securities On CarMax
Analyst David Bellinger maintained a Neutral rating, while cutting the price target from $80 to $75.

“Consumers seem to be signaling purchase intent for used vehicles, but remain hesitant to transact given ongoing affordability issues,” Bellinger said in a note.

“KMX is making progress with its fifth consecutive quarter of sequential comp sales improvement and guiding to expense leverage on +LSD% gross profit growth,” the analyst wrote. “However, we believe top-line pressures will linger throughout FY24E, pressuring a return to more normalized EPS growth in the process,” he added.

KMX Price Action: Shares of CarMax were down 0.71% to $71.47 at the time of publication on Friday.

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Posted In: Analyst ColorPrice TargetReiterationTop StoriesAnalyst RatingsChris PierceDavid BellingerExpert IdeasMizuho SecuritiesNeedhamRBC Capital MarketsSteven ShemeshStories That Matter
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