Used car retailer CarMax (NYSE:KMX) is scheduled to announce its results for the fourth quarter of fiscal 2023 (ended February 28, 2023) on April 11. Despite some improvement in used car prices in 2023, compared to the decline seen late last year, the impact of macro pressures on vehicle affordability is expected to weigh on the company’s Q4 FY23 performance.
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Analysts’ Q4 Expectations
CarMax’s revenue plunged nearly 24% year-over-year to $6.5 billion in the fiscal third quarter due to lower volumes owing to a tough macro backdrop and a decline in used-car prices. Earnings per share fell to $0.24 from $1.63 in the prior-year quarter.
Discussing CarMax’s upcoming results, RBC Capital analyst Steven Shemesh highlighted that Cox Automotive’s data shows that the overall used vehicle industry SAAR (seasonally adjusted annual rate) was down about 1.5% in the February quarter, reflecting a “modest sequential improvement” from the November quarter, which saw a decline of 8.8%.
Further, the analyst noted that CarMax website visits turned higher in January and February at an average rate of 12% year-over-year, after declining 3.6% in December. As per TipRanks’ Website Traffic Tool, website visits declined 17.5% year-over-year and were down 20.6% on a sequential basis in Q4 FY23.
Overall, the analyst noted that industry data reflects a modest rebound in retail price and unit trends throughout the February quarter. “While this could result in modest upside compared to consensus expectations, it is unlikely to have a material impact on investor sentiment as the broader economic backdrop remains challenging,” said Shemesh.
Shemesh is cautious about CarMax over the near time due to the ongoing macro uncertainty but continues to believe that the company is well-positioned to emerge stronger from a downturn.
Meanwhile, Wall Street analysts expect the company’s Q4 FY23 EPS to decline significantly to $0.20 from $0.98 in the prior-year quarter. Revenue is expected to fall about 21% year-over-year to $6.11 billion.
Is CarMax Stock a Buy?
Wall Street has a Hold consensus rating on CarMax stock based on three Buys, three Holds, and two Sells. The average KMX stock price target of $59.63 suggests a possible downside of 7.3%. Shares have advanced over 5% since the start of the year.
Conclusion
High inflation and weak consumer spending are expected to hit CarMax’s Q4 results. Ahead of the results, Wall Street remains sidelined on the stock.
