CarMax (KMX) crushed third-quarter earnings estimates early Thursday as the used-car retailer’s revenue unexpectedly rose. CarMax stock jumped. Online auto sales rival Carvana (CVNA) wavered.
For the three months ended Nov. 30, the brick-and-mortar used-car seller reported earnings of 81 cents per share on revenue of $6.223 billion. Year over year, earnings surged 56%, accelerating from a 13% gain in the prior quarter. Revenue rose 1%, besting estimates for a moderate decline. It also marked the first gain on the top line after eight down quarters, according to FactSet.
Analysts had expected CarMax to post Q3 earnings of 62 cents per share on revenue of $6.047 billion, according to FactSet. CarMax’s Q3 earnings growth accelerated from a 13% gain
CarMax’s same-store sales increased 4.3% vs. a year ago, also outpacing views. Analysts had projected same-store-sales growth of 3% vs. a 4% decline a year ago.
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During the quarter, total retail used vehicle sales rose 5.4% to 184,243 units. Total wholesale vehicle sales grew 6.3% to 136,013 units. Gross profit per retail used vehicle came in at $2,306, in line with a year ago. Gross profit per wholesale vehicle reached $1,015, up by $54 per unit.
In a note to clients on Thursday, Sharon Zackfia, a William Blair equity analyst, said CarMax delivered “meaningful” Q3 upside. “The company exceeded expectations on all key metrics including used unit comps, revenue, gross profit per car, SG&A as a percent of gross profit, and CAF (CarMax Auto Finance) income,” which returned to growth.
“We reiterate our outperform rating on CarMax given nascent sales momentum on improving used auto affordability and the potential for accelerating profitability into calendar 2025,” Zackfia added.
Analysts expect CarMax earnings to further quicken in Q4, jumping 70% per share. The quarter includes the New Year’s Eve through New Year’s Day period, one of the best times of the year for buying used cars. Analysts see CarMax earnings surging 25% in fiscal 2026 as revenue returns to 3.6% growth after three down years, FactSet shows.
Shares of CarMax popped 3.8% to 84.27 in Thursday’s stock market action. But CarMax stock pared intraday gains to 91.25. The used-car retailer cleared a cup-with-handle buy point of 86.49 on Dec. 6. But it tumbled below support at its 21-day moving average on Wednesday afternoon.
Carvana stock wobbled on Thursday, attempting a rebound from its 50-day moving average after an 8% dive on Wednesday.
On Wednesday, used-car retailers CarMax and Carvana took a hit after the Fed signaled a slower pace of rate cuts in 2025. Lower interest rates make used cars more affordable to consumers and make borrowing more palatable for companies.
On Wednesday, CarMax Auto Finance reported Q3 income increased 7.6% to $159.9 million, driven by growth in net interest margins. As of Nov. 30, the allowance for loan losses was 2.7% of managed receivables, down from 2.9% a year ago. Zackfia said the provision for loan losses was largely in line with expectations and reflected the company’s previous decision to tighten underwriting standards.
CAF blamed declining income in many prior quarters on worsening auto loan losses across the industry.
For used-car retailers, President-elect Donald Trump’s tax and tariff policies will be watched, with retail seen as an especially vulnerable sector.
The rise of digital upstart Carvana (CVNA), which gave a bright outlook on Oct. 31, has weighed on CarMax as well. But CarMax’s digital push is delivering results.
Online retail sales made up 15% of Q3 retail unit sales vs. 14% a year ago, CarMax said on Thursday. Online revenue accounted for 32% of Q3 net revenue for the quarter vs. 31% a year earlier.
Year to date, CarMax stock is now up almost 10% on the back of a fourth-quarter rally.
Please follow Aparna Narayanan on X @IBD_Aparna for more coverage.
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