Dec. 22, 2020 9:53 AM ETCarMax, Inc. (KMX)By: Clark Schultz, SA News Editor
CarMax (NYSE:KMX) is being largely defended on Wall Street after its FQ3 report topped estimates but re-assuring 2021 guidance wasn't posted.
Evercore ISI (Outperform): "CarMax is taking market share and driving profitable growth. While some (us included) expected even more from the used car leader, we remain constructive into 2021 on a materially improved set up for a multichannel leader that fits our M.E.N.D. framework at a 20% discount to the S&P. FY3Q results show continued progress after COVID crushed demand to start the year, with EPS of $1.42 +37% beating our $1.16 and the Street’s $1.13. Robust CAF results drove most of the beat, with lower SGA/better wholesale making up for a retail used unit comp miss (-0.8% YoY vs. EVR 2.5% and the Street’s +3.5%). The pushback is why aren’t comps stronger given that digital competitors like Carvana are likely growing in excess of 40% in a comparable period?... Stay the course, as KMX risk reward is appealing in our view with a favorable set up on M.E.N.D. positioning. CarMax 3Q highlights of positive total unit sales, strong wholesale and CAF profits are good, although comps down 0.8% are materially below the 'normalized' 5-8% we expect."
Bank of America (Buy): "KMX’s continued investment in its omni-channel platform and new store openings. CarMax Auto Finance income was a bright spot in 3Q, +55% YoY to $176mm (BofAe $98mm), reflecting lower provision for credit losses and higher net margin and average managed receivables. In total, we were impressed by KMX's 3Q results in light of current market volatility. We maintain our Buy rating, and view any potential weakness or volatility in the stock off the underperformance on SSS as a particularly attractive entry point."
Shares of CarMax have extended on their premarket drop and are now down 4.55%. The stock was on Seeking Alpha's Catalyst Watch with it unclear if guidance for the year ahead would be issued.
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