CarMax Q4 Earnings & Revenues Beat Estimates, Rise Y/Y

CarMax Inc. (KMX - Analyst Report) posted adjusted earnings per share of 69 cents in the fourth quarter of fiscal 2015, ended Feb 28, 2015, highlighting an increase from 44 cents a year ago. Earnings also surpassed the Zacks Consensus Estimate of 60 cents.

Carmax Inc. - Earnings Surprise | FindTheCompany

Net sales and operating revenues in the quarter rose 14.2% year over year to $3.51 billion, exceeding the Zacks Consensus Estimate of $3.49 billion. The year-over-year improvement was mainly driven by increased used vehicle and wholesale vehicle sales.

Used vehicle revenues appreciated 12.9% to $2.9 billion in the quarter, driven by higher unit sales. Unit sales of used vehicles increased 12.4% to 149,271 vehicles and their average selling price inched up 0.5% to $19,297. Comparable-store used vehicle unit sales rose 7% in the quarter. The improvement can be attributed to higher footfall in stores and improved conversion.

New vehicle revenues decreased 7.7% to $45.7 million due to lower unit sales. Unit sales of new vehicles decreased 7% to 1,680 vehicles and their average selling price decreased 0.7% to $27,101.

Wholesale vehicle revenues rose 17% to $491.9 million in the quarter. Unit sales increased 12.3% to 90,111 vehicles. Wholesale unit sales benefited from increased traffic and improvement in store base. Average selling price of wholesale vehicles increased 3.5% year over year to $5,257.

Other sales and revenues rose 102.3% to $76.9 million. Extended protection plan (EPP) revenues increased 120.7% to $67.3 million.

Gross profit increased 23.9% to $475.8 million from $384.1 million in the year-ago quarter.

Fiscal 2015 Performance

CarMax reported a year-over-year rise of 26.4% in earnings to $2.73 per share for fiscal 2015, beating the Zacks Consensus Estimate of $2.64. Revenues for fiscal 2015 increased 13.5% to roughly $14.27 billion from $12.6 billion in fiscal 2014, marginally surpassing the Zacks Consensus Estimate of $14.25 billion.

CarMax Auto Finance (CAF)

CAF reported an 11.8% increase in income to $90.4 million in fourth-quarter fiscal 2015 from $80.8 million a year ago. The improvement was primarily driven by auto loan receivables, partially offset by a lower total interest margin.

Store Openings

During the reported quarter, CarMax opened one store in the Cleveland market. In total, the company opened 13 stores in fiscal 2015. As of Feb 28, 2015, CarMax had 144 used car stores. Subsequent to the end of the fourth quarter, the company opened one store in the Minneapolis/St. Paul market and its third store in the Philadelphia market.

The company intends to open 13–16 superstores in each of the next three fiscal years. In fiscal 2016, the company plans to open 14 stores and relocate one store whose lease is expiring. The company also intends to remodel around 15 older stores.

Share Repurchase Program

During the fourth quarter of fiscal 2015, CarMax spent $210.6 million to repurchase 3.4 million shares under its existing share repurchase program. In fiscal 2015, CarMax spent $912.8 million to repurchase 17.5 million shares. As of Feb 28, 2015, the company had $2.37 billion of authorization remaining under its share repurchase program.

Financial Position

CarMax had cash and cash equivalents of $27.6 million as of Feb 28, 2015, down from $627.9 million as of Feb 28, 2014. Total debt (including financing and capital lease obligations, and non-recourse notes payable) rose to $9.1 billion as of Feb 28, 2015, from $7.6 billion as of Feb 28, 2014.

In fiscal 2015, CarMax had a cash outflow of $968.1 million from operations, compared with $613.2 million in the prior-year period. Capital expenditures were $309.8 million, down from $310.3 million in fiscal 2014. The company expects capital expenditures of around $360 million for fiscal 2016.

CarMax currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the same industry include O'Reilly Automotive Inc. (ORLY), General Motors Company (GM) and Wabash National Corp. (WNC - Snapshot Report). All these stocks carry a Zacks Rank #2 (Buy).