CarMax Earnings to Rise to $1.63 a Share in Q1; Buy with Target Price $144

The United States’ largest used-car retailer CarMax is expected to report its fiscal first-quarter earnings of $1.63 per share, which represents year-over-year growth of over 600% from $0.23 per share seen in the same period a year ago.

The Richmond, Virginia-based used car giant would post year-over-year revenue growth of over 94% to $6.2 billion. In the last one year, on average, CarMax has beaten earnings 75% of the time and beaten revenue all the time.

CarMax shares surged over 26% so far this year. The stock was trading about 1% higher at $119.43 on Thursday.

Analyst Comments

“Store-expansion initiatives and high-quality product offerings are likely to boost CarMax’s prospects. The company’s omni-channel offerings to improve customer shopping experience are likely to bolster revenues. Increasing sales of used vehicles remain a bright spot for the firm. The acquisition of remaining shares of Edmunds, which is expected to be closed in June 2021, would further solidify CarMax’s position in the used auto ecosystem,” noted equity analysts at ZACKS Research.

“However, the auto parts retailer is likely to bear the brunt of rising selling, general & administrative (SG&A) expenses. The company projects capital spending to shoot up in fiscal 2022 amid advanced digital initiatives and store expansion efforts. High debt levels also play a spoilsport. As such, the stock warrants a cautious stance at the moment.”

CarMax Stock Price Forecast

Seven analysts who offered stock ratings for CarMax in the last three months forecast the average price in 12 months of $144.00 with a high forecast of $154.00 and a low forecast of $130.00.

The average price target represents 20.48% from the last price of $119.52. Of those seven analysts, five rated “Buy”, two rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the stock price forecast of $165 with a high of $250 under a bull scenario and $63 under the worst-case scenario. The firm gave an “Overweight” rating on the used-car retailer’s stock.

“Based on historical & current data, we expect to see strength in used car sales as we move forward, particularly given the shortage of new car inventory, manufacturers pulling back on incentives, and potential tailwinds from de-urbanization, mass transit, ride-sharing, and travel. We expect CarMax (KMX) to successfully execute their Omni channel strategy, providing both online and physical dealer options to consumer,” noted Adam Jonas, equity analyst at Morgan Stanley.

KMX has consistently generated profitability and has one of the strongest balance sheets amongst the dealers. Long term, we estimate strong growth in same-store sales along new store openings, allowing KMX to achieve operating leverage, with upside from the omni-channel rollout.”

Several other analysts have also updated their stock outlook. Oppenheimer upped their price objective to $153 from $130 and gave the company an “outperform” rating. Royal Bank of Canada increased their target price to $148 from $140 and gave the stock an “outperform”. Wedbush reiterated a “neutral” rating and set a $130 target price.

Check out FX Empire’s earnings calendar

Earnings to Watch Next Week: Darden Restaurants, Nike, FedEx and CarMax in Focus

Earnings Calendar For The Week Of June 21

Monday (June 21)

There are no major earnings scheduled.

Tuesday (June 22)

Ticker Company EPS Forecast
SMDS Ds Smith £12.65
KFY Korn Ferry International $0.98
AVAV AeroVironment $0.81
KWHIY Kawasaki Heavy Industries ADR -$0.16

Wednesday (June 23)

Ticker Company EPS Forecast
PDCO Patterson Companies $0.51
INFO IHS Markit Ltd $0.80
WGO Winnebago Industries $1.76
KBH Kb Home $1.33
FUL HB Fuller $0.92
OMVJF OMV $0.97

Thursday (June 24)

IN THE SPOTLIGHT: DARDEN RESTAURANTS, NIKE, FEDEX

DARDEN RESTAURANTS: The Orlando-based restaurant operator is expected to report its fiscal fourth-quarter earnings of $1.76 per share, which represents year-over-year growth of about 242%, up from a loss of -$1.24 per share seen in the same period a year ago.

The multi-brand restaurant operator would post year-over-year revenue growth of nearly 70% to $2.16 billion. In the last four consecutive quarters, on average, the company has delivered an earnings surprise of over 270%.

“Best in class casual dining operator with strong brand portfolio. As the largest CDR operator, DRI has substantial scale advantages in shared services which can be levered in a post-COVID-19 environment by improving margins and gaining market share. Lead brand Olive Garden (~50% of sales) garners top consumer scores, its comp sales have historically outpaced the industry and recent cost savings have improved unit economics,” noted John Glass, equity analyst at Morgan Stanley.

“Acquisition of Cheddar’s has been more challenging than initially expected, though still provides longer-term growth potential. Strong position relative to peers, scale, operational leadership, unit growth and structurally higher margins drive our OW rating.”

NIKE: The world’s largest athletic footwear and apparel seller is expected to report its fiscal fourth-quarter earnings of $0.51 per share, which represents year-over-year growth of 200%, up from a loss of -$0.51 per share seen in the same period a year ago.

The Beaverton, Oregon-based footwear retailer would post year-over-year revenue growth of over 75% to $11.8 billion.

“There are many moving pieces in the Nike (NKE) model including an easy comparison from Q4:20 and shipment shifts into Q4:21 but our proprietary data on China through May 2021 is pointing to a continued deceleration in Tmall GMV, negative social media sentiment in China, and poor Baidu search trends. FY22 consensus EPS estimates appear too high. We are lowering our price target to $145,” noted John Kernan, equity analyst at Cowen.

FEDEX: The Memphis, Tennessee-based multinational delivery services company FedEx is expected to report its fiscal fourth-quarter earnings of $4.97 per share, which represents year-over-year growth of over 96% from $2.53 per share seen in the same period a year ago.

The delivery firm would post revenue growth of over 20% to $21.47 billion. In the last four quarters, on average, FedEx has beaten earnings estimates over 41%.

“We expect a beat for F4Q21 as many of the LTM trends we have seen will continue. However, more than ever, 4Q results are likely not as important as the FY22 guide, which will be the critical test of how much of the pandemic tailwinds mgmt. believes are sustainable (and deserves to be priced in),” noted Simeon Gutman, equity analyst at Morgan Stanley.

“We see EBIT growth through YE of FY21 driven by both margin improvement and vol. driven rev. growth which is helped by limited Airfreight capacity and an eCommerce surge, though yields are mixed. We continue to see secular threats to Parcel and remain skeptical that these trends will be sustainable but believe that until there is evidence of a reversal in earnings momentum, the stock can trade at its historical multiple (14-15x PE) on current EPS.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JUNE 24

Ticker Company EPS Forecast
ACN Accenture $2.24
DRI Darden Restaurants $1.76
WOR Worthington Industries $1.68
NKE Nike $0.51
FDX FedEx $4.97
SNX SYNNEX $1.93
BBBY Bed Bath & Beyond Inc. $0.08

Friday (June 25)

IN THE SPOTLIGHT: CARMAX

The United States’ largest used-car retailer is expected to report its fiscal first-quarter earnings of $1.63 per share, which represents year-over-year growth of over 600% from $0.23 per share seen in the same period a year ago.

The Goochland County-based used car giant would post year-over-year revenue growth of about 92% to $6.19 billion.

“Based on historical & current data, we expect to see strength in used car sales as we move forward, particularly given the shortage of new car inventory, manufacturers pulling back on incentives, and potential tailwinds from de-urbanization, mass transit, ride-sharing, and travel. We expect CarMax (KMX) to successfully execute their Omnichannel strategy, providing both online and physical dealer options to consumer,” noted Adam Jonas, equity analyst at Morgan Stanley.

CarMax (KMX) has consistently generated profitability and has one of the strongest balance sheets amongst the dealers. Long term, we estimate strong growth in same-store sales along new store openings, allowing KMX to achieve operating leverage, with upside from the omnichannel rollout.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JUNE 25

Ticker Company EPS Forecast
PAYX Paychex $0.67
KMX CarMax $1.63

 

Used-Car Retailer CarMax Q4 Sales to Grow 4%, Earnings to Fall

The United States’ largest used-car retailer U.S. CarMax is expected to report its fourth-quarter earnings of $1.25 per share, which represents a year-over-year decline of about 4% from $1.30 per share seen in the same quarter a year ago; however, sales will likely grow 4% year over year.

For the 2021 fiscal year, CarMax is expected to post an EPS of $4.50, down from $5.33, on sales of $18.94 billion. According to ZACKS Research, the used-car retailer’s fourth-quarter earnings is pegged at $1.27 cents on revenues of $5.15 billion.

CarMax shares, which rose more than 7% in 2020, surged over 42% so far this year.

CarMax Stock Price Forecast

Five analysts who offered stock ratings for CarMax in the last three months forecast the average price in 12 months of $135.00 with a high forecast of $140.00 and a low forecast of $130.00.

The average price target represents a 0.64% increase from the last price of $134.14. Of those five analysts, four rated “Buy”, one rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $165 with a high of $250 under a bull scenario and $63 under the worst-case scenario. The firm gave an “Overweight” rating on the used-car retailer’s stock.

Several other analysts have also updated their stock outlook. JP Morgan raised the target price to $115 from $110. Guggenheim lifted the target price to $143 from $117. Bank of America reduced their price target to $121 from $130 and set a “buy” rating. Argus raised their price target to $110 from $105. Oppenheimer issued a “buy” rating and a $130 target price for the company.

Analyst Comments

“Based on historical & current data, we expect to see strength in used car sales as we move forward, particularly given the shortage of new car inventory, manufacturers pulling back on incentives, and potential tailwinds from de-urbanization, mass transit, ride-sharing, and travel. We expect CarMax (KMX) to successfully execute their Omnichannel strategy, providing both online and physical dealer options to consumers,” noted Adam Jonas, equity analyst at Morgan Stanley.

CarMax (KMX) has consistently generated profitability and has one of the strongest balance sheets amongst the dealers. Long term, we estimate strong growth in same-store sales along new store openings, allowing KMX to achieve operating leverage, with upside from the omnichannel rollout.”

Check out FX Empire’s earnings calendar

Earnings to Watch in Holiday-Shortened Week: Lululemon, Walgreens Boots and CarMax in Focus

Earnings Calendar For The Week Of March 29

Monday (March 29)

No major earnings scheduled for release.

Tuesday (March 30)

IN THE SPOTLIGHT: LULULEMON ATHLETICA

The Vancouver-based healthy lifestyle-inspired athletic apparel company Lululemon Athletica is expected to report its fourth-quarter earnings of $2.48 per share, which represents year-over-year growth of about 9% from $2.28 per share seen in the same quarter a year ago.  In the last four consecutive quarters, on average, the company has delivered an earnings surprise of over 12%.

Lululemon would post year-over-year revenue growth of about 19% year-on-year to around $1.7 billion.

“We see upside to both Street 4Qe EPS & mgmt. guidance, as revenue, GM, & SG&A assumptions appear conservative. The recent pullback may make for an attractive entry point, though we acknowledge valuation remains full at 46x ’21e P/E. Stay Equal-weight for now, & trim price target to $386 on rising rates/WACC,” said Kimberly C Greenberger, equity analyst at Morgan Stanley.

“Expanded eComm capabilities, improved supply chain, better inventory management, and product initiatives led to enviable ’18-’19 performance and a robust return to pre-COVID-19 levels in 3Q20, making +mid-high-teens comps seem normal. Still, the current valuation appears extreme, so we stay EW. Compelling LT and post-COVID-19 growth opportunity driven by three factors: international expansion (maybe less evident in ‘20e given COVID-19 outbreak), digital growth, and product innovation. LULU dominates the NA athletic yoga apparel category due to its unique brand positioning and fashionable products, and its athleisure focus is further advantaged in a COVID-19 affected world.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE MARCH 30

Ticker Company EPS Forecast
BNTX BioNTech SE -$0.17
MKC McCormick $0.58
ASO Avesoro Resources $0.62
LULU Lululemon Athletica $2.48
IGMS IGM Biosciences -$0.74
PVH PVH -$0.37
BACHY Bank China ADR $0.46
CEA China Eastern Airlines -$0.49
GGB Gerdau $0.17
CUK Carnival -$1.54
CCL Carnival -$1.54
CCL Carnival -£1.12

 

Wednesday (March 31)

IN THE SPOTLIGHT: WALGREENS BOOTS ALLIANCE

Deerfield, Illinois-based retail pharmacy provider is expected to report its fiscal second-quarter earnings of $1.13 per share, which represents a year-over-year decline of over 25% from $1.52 per share seen in the same quarter a year ago.

The largest U.S. drugstore chain’s revenue would decline over 5% year-over-year to around $33.8 billion.

Walgreens Boots continues to maintain its estimates of low single-digit growth in adjusted earnings per share at CER in fiscal 2021. The Zacks Consensus Estimate for the same is currently pegged at $4.79. Although the company anticipates higher adverse impacts of the pandemic-led disruptions (including a weaker cough, cold, and flu season) during the second quarter of fiscal 2021, the adjusted earnings per share during the first half of fiscal 2021 is likely to be in line with the company’s earlier expectations,” noted analysts at ZACKS Research.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE MARCH 31

Ticker Company EPS Forecast
WBA Walgreens Boots Alliance $1.13
AYI Acuity Brands $1.70
UNF UniFirst $1.68
MU Micron Technology $0.93
VRNT Verint Systems $0.81
CIG Companhia Energetica Minas Gerais $0.03
ZNH China Southern Airlines -$1.41

 

Thursday (April 1)

IN THE SPOTLIGHT: CARMAX

The used-car retailer’s fourth-quarter earnings is pegged at $1.27 cents on revenues of $5.15 billion, according to ZACKS Research.

“Store-expansion initiatives and high-quality product offerings are likely to boost CarMax’s prospects. The company’s omnichannel offerings to improve customer shopping experience is likely to bolster revenues. Increasing sales of used vehicles remain a bright spot for the firm. Solid performance from the wholesale segment also acts a booster,” noted analysts at ZACKS Research.

“Further, temporary cost-cut initiatives undertaken by the firm may offer respite. However, the auto parts retailer is likely to bear the brunt of rising selling, general & administrative (SG&A) expenses as the company resumes new store expansion. Also, the second wave of coronavirus could impact the company’s sales and profits. High debt levels also play a spoilsport. As such, the stock warrants a cautious stance.”

Friday (April 2)

No major earnings scheduled for release. The stock market is closed on April 2 for Good Friday.

Used-Car Retailer CarMax Shares Plunge Over 8% as COVID-19 Hurts Store Sales

The United States’ largest used-car retailer CarMax reported better-than-expected earnings in the third quarter of the fiscal year 2021 but the Fortune 500 company’s same-store sales declined as a surge in COVID-19 cases constrained demand and resulted in tightened occupancy restrictions, sending its shares down over 8% on Tuesday.

The used-car retailer’s same-store used unit sales dipped 0.8% in the third quarter ended November 30, worse than the market expectations of a 3.5% growth, up from 11% jump in the same quarter a year ago.

However, CarMax’s 3Q EPS increased 36.5% year-over-year to $1.42 per share, better than the Wall Street consensus estimates of $1.14. The company’s revenues rose 8.2% year-over-year to $5.2 billion, topping analysts’ estimate of about $5 billion.

“We think the market on December 22 did not like the negative comparable store decline, but we don’t think it’s time to panic. Management said the metric was growing at about a mid-single-digit rate at the start of the quarter but slowed due to coronavirus restrictions and uncertainty about the election,” said David Whiston, sector strategist at Morningstar.

“We are raising our fair value estimate to $93 from $89 on the time value of money since our last update, higher fiscal  2021  and  2022  revenue,  and more  CarMax  Auto Finance income as a percent of revenue for fiscal 2021 and 2022 based on how reported results are trending. We expect good CAF results to continue given the low-interest-rate environment. In the quarter, CAF income grew 55%, and we calculate 19% growth excluding the impact of a large decline in the loan loss provision,” Whiston added.

CarMax shares closed 8.09% lower at $92.33 on Tuesday. However, the stock is up over 5% so far this year.

CarMax Stock Price Forecast

Nine analysts who offered stock ratings for CarMax in the last three months forecast the average price in 12 months at $120.33 with a high forecast of $180.00 and a low forecast of $73.00. The average price target represents a 30.33% increase from the last price of $92.33. From those nine equity analysts, seven rated “Buy”, one rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $165 with a high of $250 under a bull scenario and $63 under the worst-case scenario. The firm currently has an “Overweight” rating on the used-car retailer’s stock.

“While F&I drove the beat, investors focus on negative YoY comps and a guide for higher advertising costs and lower pricing ‘tests.’ All part of the sausage-making of true omnichannel execution, but it demands greater investor patience to see it through,” said Adam Jonas, equity analyst at Morgan Stanley

“Our 8% price target reduction reflects the changes to our forecasts that run through our 2030 DCF model. Our long-term assumptions are largely unchanged at an 11-year revenue CAGR through 2030 of 7.6%, 7.7% exit EBITDA margin assumption, 7.4% WACC and implied exit terminal EV/EBITDA multiple of 12.2x (terminal growth of 3.6%).”

Several other analysts have also recently commented on the stock. JP Morgan lowered the stock price forecast to $110 from $115. Wedbush raised the target price to $120 from $90. RBC increased price objective to $111 from $102. Oppenheimer restated a “buy” rating and issued a $130. Royal Bank of Canada boosted their target price to $110 from $100.

Analyst Comments

“Based on historical & current data, we expect to see strength in used car sales as we move forward, particularly given the shortage of new car inventory, manufacturers pulling back on incentives, and potential tailwinds from de-urbanization, mass transit, ride-sharing, and travel. We expect Carmax to successfully execute their Omnichannel strategy, providing both online and physical dealer options to the consumer,” Morgan Stanley’s Jonas added.

“Carmax has consistently generated profitability and has one of the strong balance sheets amongst the dealers. Long term, we estimate strong growth in same-store sales along new store openings, allowing Carmax to achieve operating leverage, with upside from the omnichannel rollout.”

Check out FX Empire’s earnings calendar