Analyst Note| David Whiston, CFA, CPA, CFE |
CarMax reported an excellent start to fiscal 2022 with record first-quarter results and diluted EPS of $2.63 easily beating the $1.63 Refinitiv consensus. We are leaving our fair value estimate unchanged as stronger performance now modeled for fiscal 2022 and a higher long-term return on new invested capital assumption offsets our expectations of a 5-percentage-point increase in the U.S. federal statutory tax rate next calendar year. Year-over-year comparisons are not meaningful due to the start of the pandemic a year ago, but CarMax posted good growth relative to fiscal first-quarter 2020. Compared with that quarter, which was a record, comparable unit sales rose by 16% and total revenue rose by 43% to $7.7 billion. Even though inventory is lower than management would like, there is excellent demand due to low new vehicle inventory from the semiconductor shortage. Average selling prices rose nearly 11% to $22,533, and management paused its previously announced pricing experiment due to strong demand, which enabled robust gross profit per unit of $2,205.