Skip to Content

CarMax Inc KMX

Rating as of

Morningstar’s Analysis

Valuation
Currency in USD
Is it the right time to buy or sell?
Find out with Morningstar Premium
Is it the right time to buy or sell?
Find out with Morningstar Premium

1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

CarMax Starts Fiscal 2022 With Record First-Quarter Results

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.

Read Full Analysis

Company Profile

Business Description

CarMax sells, finances, and services used and new cars through a chain of 220 used retail stores at the end of fiscal 2021 plus one new vehicle store. It was formed in 1993 as a unit of Circuit City and spun off into an independent company in late 2002. Used-vehicle sales account for about 83% of revenue, wholesale about 14%, and the remaining portion is composed of extended service plans and repair. In fiscal 2021, the company retailed and wholesaled 751,862 and 426,268 used vehicles, respectively. CarMax is the largest used vehicle retailer in the U.S., but still estimates that it has only about 3.5% U.S. market share of vehicles 0 to 10 years old but seeks over 5% by the end of calendar 2025. CarMax is based in Richmond, Virginia.

Contact
12800 Tuckahoe Creek Parkway
Richmond, VA, 23238
T +1 804 747-0422
Sector Consumer Cyclical
Industry Auto & Truck Dealerships
Most Recent Earnings May 31, 2021
Fiscal Year End Feb 28, 2022
Stock Type Cyclical
Employees 26,889

Related

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.