CarMax shares went up on Tuesday after the used-car retailer posted stronger-than-expected earnings for its fiscal second quarter and said it would start buying back its own stock again.
The stock rose 3.5% in premarket trading, bouncing back after a small drop on Monday. Other companies in the industry, like Carvana, AutoNation, and Group 1 Automotive, saw mixed results.
For the quarter ending August 31, CarMax reported adjusted earnings of $1.16 per share, a big jump from 64 cents a year ago and well above Wall Street’s estimate of 73 cents. Revenue grew 20% to $7.9 billion, beating the analyst consensus of $7.09 billion, according to FactSet.
Gross profit per used retail vehicle was $2,105, which is $111 less than last year but still better than Wall Street’s expectation of $2,022. CarMax said the small drop was due to ongoing pricing strategies to boost sales. Total retail and wholesale used vehicle sales increased 15% to 387,735 units.
Investors had been paying close attention to unit sales and profit per vehicle as important signs of CarMax’s business health. Before this report, opinions about CarMax’s recovery were mixed, but optimism had increased after the company’s first-quarter results.
The strong results on Tuesday supported the improving outlook. CarMax also showed more confidence by saying it plans to restart share buybacks at a modest level in the third quarter, based on its recent performance, ongoing business momentum, and better leverage. The company did not buy back any shares in the second quarter.
CarMax shares have gone up since the company’s first-quarter earnings report in June and are up a lot for the year, doing better than the overall market.
