KMX

CarMax has delivered a mix of strong and weak stretches for shareholders over the past few years, which puts fresh attention on a simple question for today's buyers. Is the current US$53.33 share price properly supported by the earnings power of the used car retailer. - The stock has fallen 62.8% over the past 5 years, which makes the current valuation debate far more about what the business is earning today than about past share price momentum. - Recent updates highlighted stronger revenue and profit performance alongside market share gains, which can influence how much investors are prepared to pay for each dollar of CarMax earnings. - Your read on CarMax is one view; the desks covering it have another. See what analysts think CarMax's shares could be worth. The issue now is whether that recent earnings profile justifies where CarMax trades today on an earnings basis. If you are weighing CarMax against other opportunities and want more ideas backed by clear criteria, a focused stock screen is a useful second starting point. This is especially true for one that homes in on 33 high quality undervalued stocks. The P/E ratio fits CarMax because investors often focus on the earnings power behind each used vehicle sold. At around 25.9x earnings, CarMax trades well above the Specialty Retail industry average of roughly 16.9x and also above peers near 11.9x, so buyers today are paying a richer price for each dollar of profit than the sector average. On this framework, the tailored fair multiple implied for CarMax is lower than the current P/E, which points to the stock looking overvalued on recent earnings. Despite the upbeat Q3 2026 results and stronger sentiment around the Shift into GEAR plan, the market is still pricing CarMax at a premium that assumes a lot about how those profits hold up over time. You need to weigh this against your own expectations before deciding if the current tag looks acceptable or stretched for your portfolio. Explore the numbers behind CarMax's P/E valuation. CarMax Narratives on Simply Wall St pick up where the valuation puzzle leaves off by spelling out which future paths for growth, margins and earnings would need to play out for the stock to be worth much more or much less than today's price. Each narrative sits on the Community page and frames CarMax's estimated worth as a thesis you can track over time, rather than a one off snapshot. Community views on CarMax split between one group that sees enough execution progress to support today's price and another that thinks expectations run ahead of the fundamentals. Bull case: roughly fairly valued "Used comps of 13% against an industry Keith Barr puts at "down 1% or flat to 1%" settle the claim that the business had "turned the corner"…" Discover why this Narrative puts CarMax at roughly fairly valued. Bear case: 24% overvalued "The company's heavy reliance on omnichannel investments to drive sales growth might lead to diminishing returns if consumer adoption or economic conditions don't support expected sales volumes…" Explore why this Narrative puts CarMax at 24% overvalued. Current earnings and multiples tell only part of the CarMax story, since analyst projections for sales and profits a few years from now offer a separate reference point for how today's price stacks up. Explore where analysts expect CarMax to be in a few years. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include KMX. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

Carvana (CVNA) sold a record 197,325 cars in its latest quarter. While that figure is up 38% from a year earlier, the key metric to watch is a smaller one. The profit Carvana makes on each vehicle actually fell over the same period. At 28.9 times earnings, against 21.5 for the S&P 500, investors are likely paying for profit that grows. So why is Carvana earning less on each car as it sells more? Why Is Carvana Earning Less On Each Car? The decline comes from a mix of tough year-over-year comparisons and a choice Carvana made. During the second quarter of 2026, adjusted gross profit on the vehicle itself fell $105 a car. Management said this drop happened mainly because a tariff-related benefit had added about $100 a car a year earlier. A steeper drop occurred outside the vehicle sale itself. What Carvana earns on each car apart from the vehicle itself fell $192 a car. Management gave two main reasons for this gap: benchmark rates rose, and Carvana chose to give customers lower interest rates. The company said it had passed more than 100 basis points of rate, or more than one percentage point, back to buyers. Costs and supply worked against the company as well. Management said higher fuel prices raised operations expenses. At the same time, inventory had grown more slowly than sales for several months. Executives noted that fewer cars to choose from means fewer shoppers buy. All else equal, management added, this dynamic results in lower sales or lower profit. Carvana Has Lost Little Profitability So Far Based on the second quarter's sales volume, every $100 of profit per car is worth roughly $20 million a quarter. On that scale, the per-car declines remain small relative to overall operating income. That total hit a company record of $680 million in the quarter. Carvana's operating margin tells a similar story. Over the past twelve months, it came in at 8.9%, against 9.2% a year earlier. This represents a mild slip for a metric that stood at a loss of 7.1% three years ago. Analysts still remain focused on the trend. During its July 29, 2026 call, Carvana faced questions about three straight quarters of lower EBITDA per car, a common measure of operating profit. Adjusted EBITDA reached $769 million in the second quarter, establishing a pace of more than $3 billion a year. Yet management guided the full year to a range of $2.7 billion to $3.0 billion. And analysts asked whether that guidance would imply a step down in future performance. Where Is Carvana Making Up Lower Profit Per Car? The company is offsetting the per-car decline through overhead and higher overall volume. Selling and administrative cost per car fell $157 from a year earlier, an improvement management tied to the growth in cars sold. And even with less profit generated on each individual vehicle, total net income rose $205 million to $513 million. This growth occurred within a shrinking broader market. Management said the industry was down from a year earlier. Despite this headwind, Jefferies noted on September 29, 2026 that website data showed Carvana's sales growth accelerating to about 40% in recent weeks. What Does Carvana's Share Price Likely Assume? With the stock trading at an earnings premium to the S&P 500, its valuation likely assumes that profit keeps climbing. This expectation persists even after a weak year for the stock. Carvana stock lost 14.7% over the past twelve months, while the S&P 500 returned 17.0%. The shares have also fallen hard when broader markets were shaken. During last year's tariff shock, the stock dropped 42%, against 19% for the index. Profit per car deserves attention, but it does not warrant immediate alarm. The slip in profit per car is small against Carvana's total profit, and part of it came from Carvana's choice to give buyers lower interest rates. Investors should look to the upcoming third-quarter earnings report for the next signal. Management guided to more cars sold in that quarter than in the second. If adjusted EBITDA lands below the second quarter's $769 million on a higher volume of cars, it would show Carvana's profit per car still falling. Does This Mean You Should Act On CVNA? Our purpose is to inform you with unique data so you make the right investment decisions. That said, betting on a single stock is always risky, no matter which direction you choose. There is a smarter approach. Since its inception, the Trefis High Quality (HQ) Portfolio has returned 105%, beating the benchmark that combines the three major indices - the S&P 500, S&P Mid-cap, and Russell 2000. And it did so without taking the concentrated risk that comes with do-it-yourself stock picking. If that is how you want to invest, the HQ Portfolio is the place to start.

CarMax, Inc. KMX has lost 5.8% since it reported second-quarter fiscal 2027 earnings on Sept. 29, 2026. It continues to face pressure from competitive pricing, which is weighing on per unit margins, while the expansion of CarMax Auto Finance (CAF) into Tier 2 lending increases credit and reserve exposure. Nevertheless, stronger used-vehicle sales volumes, digital initiatives, cost discipline and improving CAF income are supporting its recovery prospects. Let's look at the key factors supporting and weighing on KMX stock. CarMax's nationwide footprint, logistics network and omnichannel model remain competitive advantages, helping it improve sourcing, customer reach and operating efficiency. In the second quarter of fiscal 2027, retail used-vehicle unit sales increased 13.8%, while comparable store unit sales rose 13%. Wholesale unit sales climbed 15.9% to 160,344. CarMax had 258 stores across 42 states at quarter-end and planned four openings in fiscal 2027, three of which have already happened. The company's digital capabilities supported 81% of retail unit sales, with omni sales representing 68% and online retail sales accounting for 13%. Digital investments and partnerships could further support the recovery. CarMax scaled AI voice technology to all inbound store and customer experience center calls and redesigned its car detail page to improve inventory visibility, personalized payments and purchase steps. Edmunds supports technology, customer-funnel capabilities and dealer sourcing, while its Recurrent collaboration provides used-EV battery insights. Management expects further conversion gains as it integrates its digital, AI, data science and pricing efforts. Meanwhile, the $200 million SG&A exit-rate savings target by the end of fiscal 2027 remains an earnings driver. SG&A per total unit declined 8.8% in the second quarter. Additional corporate payroll actions, including about $6 million in expected fiscal third-quarter severance, are intended to generate recurring savings. Other gross profit climbed 33.1% to $183.3 million, helped by extended protection plans (EPP) and service efficiencies. Management expects roughly $35 of incremental EPP margin per retail unit in fiscal 2027. The company plans to resume share repurchases at a modest pace in the third quarter, with $1.31 billion remaining under authorization. The measured pace leaves room for investment in operations and lending growth. Despite strong unit growth, CarMax faces a profitability tradeoff as competitive pricing weighs on vehicle margins. Retail used-vehicle gross profit per unit fell $111 year over year to $2,105 in the fiscal second quarter, while wholesale gross profit per unit declined $135 to $858. Total gross margin narrowed to 10.1% from 10.9%. Management expects fiscal 2027 retail gross profit per unit to remain below the prior-year level, but with a decline of less than $200. Sustained volume gains and efficiencies will be needed to offset the pricing pressure. Cash generation add to the concerns. Adjusted net cash from operating activities declined to $263.7 million over the trailing 12 months, from $491.7 million in fiscal 2026, potentially limiting flexibility for reinvestment and shareholder returns. At the same time, CAF's expansion into Tier 2 lending is increasing reserve exposure. Overall CAF penetration declined to 40.9% from 42.6% a year earlier, even as CAF financed 22% of Tier 2 volume. The allowance for loan losses rose sequentially to 3.07% from 2.95%. Management expects nearly $1 billion of Tier 2 originations by fiscal year-end and fiscal 2027 CAF income to be slightly below fiscal 2026, pointing to continued financing and credit headwinds. The turnaround also hinges on executing reconditioning, logistics, corporate cost reduction, AI and digital initiatives. Delays or weaker productivity improvements could limit the savings and customer conversion gains needed to sustain higher volumes. Against this backdrop, improving sales momentum is encouraging, but a durable recovery will require stronger per unit profitability, cash generation and returns on invested capital. CarMax's improving sales momentum, digital initiatives and cost discipline support its recovery prospects. However, margin pressures, weak cash generation and rising credit risks remain concerns, making a cautious hold stance prudent until profitability improves. CarMax, Inc. price-consensus-chart | CarMax, Inc. Quote KMX currently carries Zacks Rank #3 (Hold). Some better-ranked stocks in the Auto space are Mobileye Global Inc. MBLY, Allison Transmission Holdings Inc. ALSN and Garrett Motion Inc. GTX. MBLY and ALSN sport a Zacks Rank #1 (Strong Buy), while GTX carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here. The Zacks Consensus Estimate for MBLY's current-year earnings is pegged at 49 cents per share, indicatingba 36.1% year-over-year increase. Its earnings beat the Zacks Consensus Estimate in all of the trailing four quarters, with the average earnings surprise being 69.8%. The Zacks Consensus Estimate for GTX's current-year earnings is pegged at $1.92 per share, indicating a 26.3% year-over-year increase. Its earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average earnings surprise being 16.8%. The Zacks Consensus Estimate for ALSN's current fiscal-year earnings is pegged at $10.27 per share, indicating a 25.1% year-over-year increase. Its earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed once, with the average negative earnings surprise being 0.3%. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report CarMax, Inc. (KMX) : Free Stock Analysis Report Allison Transmission Holdings, Inc. (ALSN) : Free Stock Analysis Report Mobileye Global Inc. (MBLY) : Free Stock Analysis Report Garrett Motion Inc. (GTX) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

CarMax (KMX) is back on investors' radar after a cluster of late September developments, including new senior hires tied to its Shift into GEAR plan and a fresh quarterly earnings release. Recent trading has cooled after a strong run, with a 1-day share price move down 3.64% and a 30-day share price return down 15.82%. However, the year-to-date share price return is up 35.61% and the 1-year total shareholder return is up 20.11%, so momentum appears more like a pause than a reversal as investors weigh the latest earnings jump, leadership appointments and long history of buybacks against a weaker 3-year and 5-year total shareholder return. Scan how CarMax's story compares with other retailers by reviewing a hand picked list of solid balance sheet and fundamentals (25 results) that have also drawn fresh attention from recent earnings and leadership changes. CarMax shares have pulled back while sitting below analyst targets and well above some intrinsic value estimates. Which reference point appears closer to fair value once the recent earnings and buyback history are taken into account? CarMax last closed at $53.28, while the most followed narrative pegs fair value around $54.09. This leaves only a slim valuation gap and puts the focus firmly on how management is choosing to earn that price. Beyond that near term, our goal is to self-fund strong competitive positioning through more efficient operations rather than lowering GPU. Mayor-Mora said it, and Barr's prepared remarks had made the same promise, price competitiveness "through more efficient operations, rather than a combination of lower GPUs and efficiency gains, as we are doing this year." See why 1 investors see CarMax as 1% undervalued. Result: Fair Value of $54.09 (ABOUT RIGHT) Still, CarMax's narrative leans on cost efficiencies and FTC enforcement benefits that could fade, while softer CAF penetration trends leave less room for error. Find out about the key risks to this CarMax narrative. While the community fair value of $54.09 frames CarMax as roughly in line with its current $53.28 price, the P/E picture is harsher. The stock trades on 25.9x earnings, compared with 16.6x for the US Specialty Retail group and 11.2x for peers, and above a 21.5x fair ratio. That gap points to valuation risk if sentiment cools. For a closer look at how these earnings multiples line up with the underlying business and future expectations, See what the numbers say about this price — find out in our valuation breakdown. Mixed messages around CarMax can be useful if you let them sharpen your own thinking. Move fast, weigh the upside and downside, and use the 1 key reward and 3 important warning signs. If CarMax sharpened your thinking, do not stop here. The next winners on your watchlist often come from places you have not checked yet. - Target resilient compounding by reviewing a 31 resilient stocks with low risk scores that filters for businesses with sturdier fundamentals when markets turn choppy. - Chase value with discipline by scanning a 29 high quality undervalued stocks that highlights strong cash generation paired with more conservative pricing. - Strengthen your income stream by reviewing a 8 dividend fortresses focused on higher yielding payouts with more durable balance sheets. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include KMX. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

On September 29, CarMax, Inc. (NYSE:KMX) reported results for the second quarter of fiscal 2027 ended August 31, 2026. The company delivered a stronger-than-expected quarter as higher vehicle sales and controlled expenses drove earnings. The company reported revenue of $7.9 billion, up 19.5% year-over-year. Combined retail and wholesale unit sales increased 14.7%, while net earnings per diluted share rose 81.3% to $1.16. The results came well ahead of market expectations of $7.03 billion in revenue and $0.75 in EPS. CarMax, Inc. (NYSE:KMX) is benefiting from solid execution and early progress on its "Shift into GEAR" strategy, which focuses on strengthening its core business and returning the company to sustained growth. The company also said it plans to resume share repurchases in the third fiscal quarter. CarMax, Inc. (NYSE) has rallied nearly 40% this year, but it still didn't make our list of 10 Stocks That Will Go to the Moon According to Reddit. Investors may want to see which stocks Reddit believes have even more upside from here. Higher Sales Support the Turnaround The company's retail used-vehicle business was a key driver. Retail used unit sales increased 13.8%, while comparable-store used unit sales rose 13.0%. The increase in comparable sales shows that the pricing strategy is helping attract customers and support higher vehicle volumes. At the same time, CarMax, Inc. (NYSE:KMX) kept a tight lid on costs as selling, general and administrative (SG&A) expenses increased just 4.6%, much slower than the 19.5% increase in revenue. If the company can maintain this gap between revenue growth and expense growth, it could create additional operating leverage and support earnings growth. Margin Pressure Remains a Concern However, the stronger sales numbers come with some pressure on profitability per vehicle. Gross profit per retail used vehicle declined to $2,105 from $2,216 a year earlier. Gross profit per wholesale unit also fell to $858, down $135. This shows that the company is currently generating stronger earnings with the help of higher sales volumes and cost control, while profitability on each vehicle remains under pressure. Therefore, sustaining the turnaround could depend not only on maintaining unit growth but also on stabilizing per-unit margins. Additionally, auto affordability and elevated interest rates remain important risks for used-car demand and CarMax Auto Finance. CarMax isn't the only auto retailer growing volumes while margins remain under pressure. See how this stock is trying to outrun the same profitability squeeze. What the Numbers Say Hedge fund interest in the stock increased during the second quarter. According to Insider Monkey's database, 58 hedge funds held CarMax, Inc. (NYSE:KMX) at the end of the second quarter, up from 51 in the first quarter. Some might argue that the stock's performance also suggests that investors are already pricing in a meaningful continuation of the turnaround. As of October 2, CarMax, Inc. (NYSE:KMX) had gained nearly 40% year-to-date. Valuation is another factor that should be considered. CarMax, Inc.'s (NYSE:KMX) trailing P/E ratio is 35.30, while its forward P/E stands at 21.55, as of September 22. While this does not make the stock look obviously cheap, the forward valuation could become more reasonable if the recent earnings recovery can continue. The latest results give investors solid evidence that the turnaround is gaining traction. While we acknowledge the potential of KMX as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock. READ ALSO: Target (TGT) Cuts Prices After a Strong Rally. Is the Stock Still Cheap? and Cintas (CTAS) Beats Estimates and Raises Fiscal 2027 Guidance Despite UniFirst Deal Uncertainty. Disclosure: None. Follow Insider Monkey on Google News.

- Interested in Carnival Corporation? Here are five stocks we like better. - Carnival posted record quarterly revenue and net income as 2027 bookings reached record occupancy and pricing levels. - CarMax beat fiscal second-quarter expectations as vehicle sales rose and profitability improved sharply from a year earlier. - Carnival and CarMax still face company-specific and macroeconomic headwinds, but their results show pockets of resilience in the consumer discretionary sector. It's been a challenging year for consumer discretionary stocks. Through nine months of 2026, they have performed the worst among the S&P 500's 11 sectors, posting a year-to-date (YTD) loss of nearly 9%. But on Tuesday, Sept. 29, strong earnings from two companies at opposite ends of the consumer cyclical spectrum provided investors with a glimmer of hope that a late-year turnaround could be in the cards. → AST SpaceMobile's BlueBird Progress Comes With Several Risks Still Unresolved When purchasing power is eroded, the consumer discretionary sector is among the most likely to feel that fallout. Such is the case this year, as the Trump administration's tariff policies have resulted in some clear winners and losers. With inflation remaining elevated, the Consumer Price Index (CPI) reading remains above the Federal Reserve's 2% target. Much of that has been driven by surging energy prices amid the war in Iran. → McCormick Stock Trades Cheap, Offers Dividend Growth and Unilever Deal Upside But when you drill down into the numbers, it's evident that consumers' budgets are also under pressure when it comes to non-essential purchases, which don't command spending like sectors with inelastic demand, including consumer staples, healthcare, and utilities. According to the U.S. Bureau of Labor Statistics, August's headline inflation was 3.4% year over year. But the CPI report also showed that food away from home increased 3.4%, apparel increased 3.6%, and airfare increased 23.4% from a year earlier. → Target's Holiday Blitz: Slashing Prices to Capture Market Share However, for the following two companies, many of those challenges—which weighed heavily on their respective stock performances earlier in the year—could be in the rearview mirror. Cruise prices have been trending downward amid pockets of softer near-term demand. But while some major cruise lines are offering deals to get passengers on board, such as select $80-per-night fares, those companies are maintaining margins through increased add-ons like shore excursions, beverage and dining packages, WiFi connectivity, and spa and wellness services. That materialized when Carnival (NYSE: CCL) reported strong Q3 earnings on Sept. 29, resulting in shares climbing about 13% on the day. The company—which owns and operates a portfolio including Carnival Cruise Line, Princess Cruises, Holland America Line, Seabourn, Cunard, P&O Cruises, P&O Cruises Australia, AIDA Cruises, and Costa Cruises—beat on the top and bottom lines. Earnings per share (EPS) of $1.43 topped the consensus estimate of $1.35, while revenue of $8.44 billion surpassed analysts' expectations of $8.39 billion. The earnings beat extended Carnival's streak of quarterly EPS beats dating back to Q4 2022, while the revenue beat was its second in three quarters. Quarterly revenue and net income both hit record levels. In his comments on the earnings call, CEO Josh Weinstein highlighted that improved booking trends that began in Q2 continued throughout Q3. Carnival also noted growth opportunities from its destination portfolio—particularly Celebration Key, which is expected to welcome approximately 3.5 million guests next year as more ships and brands begin calling there. The company is also increasing its exposure to Europe, particularly Northern Europe; Europe as a whole will tie the Caribbean as its largest deployment region in 2027. Management expects residual booking disruption to weigh on the first quarter of 2027, while the new Carnival Rewards program will create accounting-related yield headwinds through 2027 before turning positive in 2028. Higher fuel prices also remain a headwind, although Carnival plans to continue relying on reductions in fuel consumption. Weinstein added that Carnival is already turning its attention to next year, with 2027 "already half booked with both occupancy and pricing at record levels." Of the 28 analysts currently covering CCL, 22 assign it a Buy rating. Overall, it receives a consensus Moderate Buy rating alongside an average 12-month price target of $34.14—welcome news after shareholders endured a nearly 36% loss from the stock's YTD high on Feb. 6 through its YTD low on Sept. 24 Shares of used vehicle retailer CarMax (NYSE: KMX) had already been undergoing a resurgence in the lead-up to its Q2 fiscal year 2027 earnings report on Sept. 29. A double beat added fuel to that fire, pushing the stock about 5% higher on the day and bringing its gain to more than 63% after hitting a YTD low on May 19. Used car prices remain historically elevated. But according to data from the Federal Reserve Bank of St. Louis, they have come down 16.56% since their all-time high in February 2022. August's CPI report showed that trend continuing, with used car prices undergoing deflation and having fallen 2.3% year over year (YOY). That, among other factors, has helped CarMax bounce back after losing more than 76% from its five-year high before this year's rally gained traction. The company's vehicle sales accelerated in the quarter, and earnings improved sharply from a year earlier. That resulted in EPS of $1.16, easily topping the consensus estimate of 73 cents, and revenue of $7.88 billion exceeding analysts' expectations of $7.09 billion. The earnings beat was CarMax's sixth in seven quarters. In his comments on the earnings call, CEO Keith Barr highlighted the company's 81% YOY EPS growth and YOY total vehicle sales growth of 15%. But headwinds remain. CarMax still faces pressure from vehicle affordability, interest rates and lower per-unit margins, making continued execution important. Management expects fiscal 2027 retail gross profit per unit to decline by less than previously projected, but still anticipates YOY declines in both Q3 and Q4. That has contributed to a consensus Reduce rating and an average 12-month price target of $56.71, which is roughly in line with the stock's current price. The article "Carnival and CarMax Pop on Strong Earnings, but Challenges Remain" was originally published by MarketBeat. View MarketBeat's top stocks for October 2026.

Yesterday morning, before the market opened, CarMax (NYSE:KMX) reported impressive Q2 earnings, with revenue up 19.5% year-over-year (YOY) and earnings per share up a jaw-dropping 81.2%. So it was unsurprising that the company's shares were up 4.7% yesterday. But today, the market suddenly seemed to sour on CarMax. Shares plummeted throughout the day, dropping 7% to close at $55.09, below its pre-earnings price. Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue » What on earth happened? Is the company a buy at this price after its earnings report? Here's what investors need to know. Image source: The Motley Fool. CarMax's earnings boost might seem counterintuitive given the company's strategy going into the quarter. The company is led by new CEO Keith Barr, who is just six months into his tenure. Barr and his management team have focused on offering more competitive prices for CarMax's used vehicles by enhancing its pricing algorithms, and it appears they've succeeded. CarMax sold more vehicles (or "units") than it did in the year-ago quarter, but recorded lower profits from those sales, as you'd expect. What you might not expect is that the average selling price of each vehicle increased. On the retail side, unit sales were up 13.8%. Retail gross profit per unit was $2,105, a decrease of $111 (5%) from the prior-year quarter, reflecting more competitive pricing. But the average retail selling price per unit was $27,623, up $1,600 (6.3%) YOY. In other words, CarMax's sales prices went up, but the company trimmed its margins so it made less money per vehicle. It was a similar story in CarMax's wholesale division, which sold 15.9% more units than in the year-ago quarter. Gross profit per unit dropped $135 (13.6%) to $858, but average wholesale selling price per unit increased by $145 (1.8%) to $8,036. But those numbers, while a net positive, don't get you to an 81% increase in net income. Where did that come from? Image source: Getty Images. CarMax's impressive per-share earnings growth was driven by a series of smaller factors rather than a single big one. The 19.5% YOY revenue boost was one of those things, but there were many others. Income from auto financing was up 32.1% to $135.6 million, as the company lowered its loan-loss provision by $29 million (20.3%). Meanwhile, the auto financing segment also recognized a $16.6 million gain on the sale of residual financial interests and increased servicing fees by $6.1 million. Part of this was due to expansion into offering credit to "Tier 2" borrowers. These are borrowers with above-average credit profiles that are below the "prime" Tier 1 borrowers. Previously, CarMax handed these customers off to third-party lenders, but because such borrowers usually pay higher loan rates, CarMax generates more profits from them. CarMax financed 22% of its Tier 2 sales volume in Q2, up from just 10% in the year-ago quarter. Extended protection plans and other service operations saw robust growth of 33.1%, boosting net income. The company also managed to lower its selling, general, and administrative (SG&A) expenses across the business. Those expenses rose by only 4.6%, well below overall revenue growth. Lastly, the company reduced its share count by 3.9% over the year, resulting in fewer outstanding shares and slightly boosting diluted earnings per share. In other words, the business seems to be showing improvement across the board. Does that mean it's a buy? Although CarMax didn't offer any forward guidance, the same factors that helped it succeed in this quarter should continue to help it moving forward. In particular, the Federal Trade Commission's recent enforcement of transparent pricing rules is now requiring all used car retailers to disclose all hidden fees upfront. CarMax has always done this, but now that its competitors are being forced to do so as well, it's benefiting from the level playing field. Management credits this rule change for boosting the company's comparable store sales. The higher-interest rate environment and CarMax's expansion into Tier 2 lending should continue to boost income from its financing arm. Increased sales of extended protection plans and lower SG&A expenses should also benefit the bottom line in the long term. In short, although CarMax's stock has been rocky since the sky-high used-vehicle price era ended, it looks like a much better buy now as a turnaround play. 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Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. - Achieved 13% used unit comp growth by dynamically managing gross profit per unit (GPU) to enhance price competitiveness and pass reconditioning efficiencies to customers. - Benefited from a significant market tailwind as FTC regulatory focus on transparent pricing required competitors to include fees, highlighting CarMax's no-haggle value proposition. - Attributed approximately half of the comp performance to internal strategic actions, including pricing algorithm enhancements and improved customer experience tools. - Strengthened the leadership team with new executive appointments in Digital and Strategy to unify the end-to-end customer journey and accelerate data-driven decision-making. - Maintained a resilient consumer base across all income cohorts, with particular strength in higher-priced vehicle segments during the quarter. - Leveraged the Edmunds partnership to grow dealer-sourced inventory by 54%, providing a more profitable sourcing alternative than traditional auction houses. - Scaled agentic AI voice technology to 100% of store and customer experience center calls to streamline inquiry resolution and associate connectivity. - Revised full-year GPU outlook to a year-over-year decrease of less than $200 per unit, reflecting better-than-expected balance between demand and efficiency gains. - Intend to resume share repurchases at a modest level in the third quarter, signaling confidence in the 'Shift into GEAR' strategy and improved leverage. - Committed to self-funding future price competitiveness through the 'Run Lean' pillar, targeting $200 million in fiscal year 2027 exit rate savings. - Anticipate CAF FY '27 income will be slightly lower than FY '26 while scaling Tier 2 originations toward a $1 billion year-end target. - Expect year-over-year corporate incentive compensation dynamics to remain similar in the third quarter before moderating in the fourth quarter. - Recorded a $17 million gain on the residual sale related to a non-prime securitization, benefiting CarMax Auto Finance (CAF) income. - Estimating approximately $50 million in total settlement-related non-cash, non-recurring charges in the second half of the year due to the termination of a legacy pension plan. - Expect approximately $6 million in severance expense in the third quarter following actions to further streamline the corporate cost structure. - Noted a decline in CAF Tier 1 penetration as customers with more funding alternatives shifted to cash or credit unions in response to higher interest rates. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. - Management explained that GPU performance was driven by a balance of demand, reconditioning efficiencies, and a 30-day warranty redesign. - Confirmed that future price investments will be self-funded through operational efficiencies rather than just margin compression. - Management noted that the number of 'great deals' for CarMax on third-party sites like Cars.com more than doubled year-over-year due to competitors now being forced to disclose fees. - The tailwind is expected to persist through at least May as the industry continues to adjust to compliance enforcement. - Identified unproductive vehicle transfers and holds as key areas for future cost reduction within the 'Shift into GEAR' framework. - Management is testing how hold and transfer policies impact sales versus inventory turns to optimize the 2.5 million annual vehicle transfers. - Observed stability in the lowest income cohort and growth in higher income cohorts, leading to increased sales of newer, higher-priced vehicles. - CAF is intentionally expanding into Tier 2 lending to capture volume previously passed to third-party partners, with credit performance meeting expectations.

Image source: The Motley Fool. Sept. 29, 2026 - Vice President, Investor Relations - David Lowenstein - President and Chief Executive Officer - Keith Barr - Executive Vice President and Chief Financial Officer - Enrique Mayor-Mora - Executive Vice President, CarMax Auto Finance - Jon Daniels Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Second Quarter Fiscal Year 2027 CarMax Earnings Release Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, David Lowenstein, VP, Investor Relations. Please go ahead. David Lowenstein: Good morning. Thank you for joining our fiscal 2027 second quarter earnings conference call. I'm here today with Keith Barr, President and CEO; Enrique Mayor-Mora, Executive Vice President and CFO; and Jon Daniels, Executive Vice President, CarMax Auto Finance. Let me remind you our statements today that are not statements of historical fact, including, but not limited to, statements regarding the company's future business plans, prospects and financial performance, are forward-looking statements we make pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on our current knowledge, expectations and assumptions and are subject to substantial risks and uncertainties that could cause actual results to differ materially from our expectations. In providing projections and other forward-looking statements, we disclaim any intent or obligation to update them. For additional information on important factors and risks that could affect these expectations, please see our Form 8-K filed with the SEC this morning, our annual report on Form 10-K for fiscal year 2026 and our quarterly report on Form 10-Q previously filed with the SEC. Please note, in addition to our earnings release, we have also prepared a quarterly investor presentation, and both documents are available on the Investor Relations section of our website. Our commentary today may include non-GAAP financial measures. Reconciliations of these measures to the comparable GAAP measures are available in the investor presentation. Should you have any follow-up questions after the call, please feel free to contact our Investor Relations department at (804) 747-0422, extension 7865. Lastly, let me thank you in advance for asking only 1 question and getting back in the queue for more follow-ups. Keith? Keith Barr: Thank you, David. Good morning, everyone, and thanks for joining us. As I reflect on my first 6 months at CarMax, I am proud of the progress we have made in strengthening the business. Last quarter, I introduced our strategy for growth built around 4 pillars that place the customer at the center of everything we do and that are designed to meaningfully improve how we operate at scale and support consistently strong performance. Our strong second quarter results reflect solid execution and the initial benefits we are seeing as we deliver on the strategy. Used unit comps grew 13%, driven largely by improved price competitiveness with total units across used and wholesale growing 15%. Earnings per share grew 81% year-over-year to $1.16, supported by robust comp growth, other gross profit expansion through the performance of our extended protection plan products, an increase in CAF contribution and continued SG&A leverage. I want to thank all of our associates for their hard work, which has underpinned these results. Enrique and Jon will speak to our second quarter performance in more detail in a few moments. Our improving performance has been driven by the speed and focus our teams have put into delivering our strategy. We have named our strategy for growth Shift into GEAR and have rolled it out across our corporate offices and entire field organization. Our associates are highly engaged with the steps we are taking to strengthen our core operations, which are designed to deliver robust financial results over the years to come. We have a lot to be proud of, and I want to highlight a few examples of the progress we made across each of our 4 pillars this quarter. While we speak to the pillars individually, like many aspects of our business, they are interconnected, and many overlapping benefits exist. As a reminder, Shift into GEAR starts with a great offering; we will give customers every reason to choose CarMax by offering a great car at the right price. During the second quarter, we further strengthened our price competitiveness to support retail sales growth. We did this by continuing to drive efficiencies in reconditioning, dynamically managing GPUs and then passing savings on to customers. In addition, we continue to improve our pricing algorithms to ensure we remain more competitive across demand cycles. We did this by incorporating local market insights more granularly and by expanding comparison points across a broader set of vehicles. These enhancements resulted in sharper pricing that resonated well with our customers and supported our sales. Our second pillar is easy experience; we will make it easy to do business with us, both online and in our stores. This quarter, we enhanced the customer experience to better support the purchase journey from digital to in-person. We scaled AI voice technology to 100% of both inbound store and customer experience center calls, which enables customers to quickly resolve their inquiries through our agentic AI tools or directly connect to the right associate for help. Additionally, we improved our digital experience by redesigning our car detail page to make it easier for customers to find and buy the right car for them. Recent updates include providing greater visibility into our inventory selection, incorporating personalized monthly payments and communicating next steps in the purchase process more clearly. The enhancements we made this quarter supported sales conversion, and we anticipate further gains over time. Our third pillar is add value. This pillar focuses on growing profitability by maximizing value across all aspects of our business. This will be done by connecting customers with valuable offerings and by capturing a larger portion of customer financing through CAF. During the second quarter, we grew our extended protection plan unit margins materially year-over-year as we continue to launch our redesigned offering. Additionally, we increased our Tier 2 penetration and recorded a gain on the residual sale related to our 2026-B non-prime securitization. Our final pillar is run lean; we will unlock efficiencies to enable a great offering, meaningfully improve how we operate at scale and support strong returns for our shareholders. During the second quarter, as I noted earlier, we continued taking costs out of our reconditioning operations and maintained our approach of passing savings on to customers through more competitive pricing to drive sales. Also, from an SG&A perspective, we took additional steps this quarter to solidify achieving our commitment of $200 million in fiscal year '27 exit rate savings. To support and advance Shift into GEAR, we are strengthening our leadership team. Today, I am pleased to announce 2 key appointments that will help us build on the momentum we are seeing as we begin to deliver on our strategic plan. First, effective October 5, Elizabeth Dirgins will join CarMax as Executive Vice President, Chief Digital and Customer Officer. In this newly created role, Elizabeth will own and unify the end-to-end customer experience, from customer acquisition through vehicle transaction. In this capacity, she will oversee our marketing, product and Edmunds team. With more than 2 decades of digital product and customer experience leadership, Elizabeth comes to us from Volkswagen Financial Services, where she served as Chief Digital Officer for the North American region. Second, Jeff Campbell, who has been with CarMax for over a decade, joined our senior leadership team in August as Senior Vice President, Strategy. Jeff is leading a newly centralized function designed to accelerate key decisions by bringing together all of our strategy, data science, AI and pricing teams. Jeff has held leadership roles at CarMax spanning product, strategy and transformation. Elizabeth and Jeff both bring the skills, experience and focus we need as we build a faster, more connected company that puts the customer at the center of everything we do. Both positions will report directly to me. Our customer promise is to deliver a great car at the right price with an online and in-store experience that our customers love. All the steps we have been taking are in service of that promise and to create confidence for the road ahead for our associates, customers and investors. We have a clear strategy, a solid foundation and a team that is committed to delivering strong unit and earnings growth that enables us to consistently reward our shareholders. Based on our second quarter performance, continued momentum and improving leverage, we intend to resume share repurchases at a modest level in the third quarter. Now I'd like to turn the call over to Enrique to discuss our second quarter financial performance in more detail. Enrique? Enrique Mayor-Mora: Thanks, Keith, and good morning, everyone. We are encouraged by the recent growth across the business as our Shift into GEAR strategy is yielding strong financial results, highlighted by the continued improvements in our year-over-year sales and earnings trends. During the second quarter, we delivered total sales of $7.9 billion, up 19% compared to last year. Across our retail and wholesale channels, we sold approximately 388,000 vehicles, up 15% versus the second quarter last year. In our retail business, used unit comps increased 13% and total used unit sales grew by 14%. Sales performance this quarter was primarily supported by more competitive pricing. As Keith discussed, we continue to realize efficiency gains in cost of sales, and we dynamically manage GPUs, passing those benefits on to customers. Together with the enhancements we are making to our pricing capabilities, these actions supported a significant improvement in our year-over-year sales trend. In addition, we benefited from enhanced FTC regulatory focus that has brought greater transparency to advertised vehicle pricing industry wide by requiring fees to be included. Given our long-standing commitment to transparent, no-haggle pricing, this brings more clarity to the strength of the CarMax consumer offer by enabling customers to make more direct price comparisons and is a tailwind to our business. Average selling price was $27,623, a year-over-year increase of $1,630 per unit. Wholesale unit sales were up 16% versus last year's second quarter. Average wholesale selling price increased by $145 per unit to $8,036. We bought approximately 310,000 vehicles during the quarter, up 6% from last year. We purchased approximately 262,000 vehicles from consumers, relatively flat to last year's second quarter. With the support of our Edmunds team, we sourced the remaining approximately 48,000 vehicles through dealers, which was up 54% from last year. Second quarter net earnings per diluted share was $1.16 versus $0.64 last year, an 81% increase, a strong positive change in year-over-year trend relative to the preceding 4 quarters. Total gross profit was $799 million, up 11% from last year's second quarter. Used retail margin of $479 million increased by 8%, driven by higher volume and partially offset by lower profit per used unit of $2,105, which was down $111 per unit from last year's second quarter. In managing margins more dynamically, we lowered GPUs by less than the full year $200 per retail unit outlook we provided previously as we balance demand, margins and efficiency gains in our reconditioning processes to support sales. We expect FY '27 full year retail margins will be down less than the $200 per unit as compared to FY '26. Wholesale vehicle margin of $138 million was flat to a year ago with higher volume offset by lower gross profit per unit of $858, which was down $135 per unit. Other gross profit was $183 million, an increase of $46 million or 33% from last year's second quarter. EPP margin dollars were up $27 million, driven by growth in both unit volume and unit margins, which were up $46 per unit in the second quarter. We have been encouraged with the impact from our EPP product redesign, focused on providing our customers with more affordable options and from our new wheel, tire and dent product offering. We remain on track to drive approximately $35 per unit in incremental EPP margin for the full fiscal year. Service margin increased by $22 million, driven primarily by efficiency gains in cost of sales and leverage from unit volume growth. CarMax Auto Finance income of $136 million was up 32% year-over-year. Jon will provide detail on CAF in a few moments. On the SG&A front, expenses for the second quarter were $629 million, up 4.6% from the prior year. SG&A levered robustly by $157 per total unit or 9% to $1,621. SG&A dollars for the second quarter versus last year were mainly impacted by 2 factors. First, compensation and benefits, excluding share-based compensation expense, increased by $11 million. This year-over-year comparison reflects materially lower corporate incentive compensation in the prior year and strong performance this year. Excluding this impact, compensation and benefits would have decreased by over $14 million, primarily reflecting lower field and corporate payroll, partially offset by variable costs associated with higher sales. We expect the year-over-year corporate incentive compensation dynamic to remain similar in the third quarter and to moderate in the fourth quarter. Second, share-based compensation increased by $7 million, driven by upward movement in our stock price. Regarding SG&A, we remain on track to deliver on our $200 million in identified savings as an FY '27 exit rate target, and we continue to drive toward expense efficiencies. As part of these efforts, we recently took additional actions to further streamline our corporate cost structure, which we expect will result in approximately $6 million in severance expense in the third quarter. Also worth noting, in this quarter's P&L, other income increased by $15 million compared to the same period last year, primarily reflecting unrealized gains on a small number of equity investments. As we have noted previously, we maintain a modest portfolio of investments across the used auto ecosystem. Separately, we are completing the termination of our legacy pension plan and expect it to be materially complete by the end of the fiscal year. As part of this process, we estimate approximately $50 million in total settlement-related noncash, nonrecurring charges will be recorded in other expense, with relatively similar amounts expected to be recognized in the third and fourth quarters of this fiscal year. Our expectation is that the assets in our pension trust will fully fund the settlement of the pension liabilities. Further, the planned termination will eliminate potential future corporate funding requirements. Regarding capital structure, as Keith mentioned, with a strong second quarter, a positive outlook on the balance of the year and traction on our strategy, we intend to restart our share repurchase program in the third quarter. We expect to begin our buybacks at a modest pace below the average quarterly pace prior to our pause. Our objective is to appropriately manage our net leverage to maintain financial flexibility and to efficiently access the capital markets for both CAF and CarMax as a whole, while also returning capital back to our shareholders. As of the end of the quarter, we had $1.31 billion of repurchase authorization remaining. I will now turn the call over to Jon to provide more detail on CarMax Auto Finance and our continuing focus on full credit spectrum expansion. Jon? Jon Daniels: Thanks, Enrique, and good morning, everyone. During the second quarter, CarMax Auto Finance originated $2.3 billion, resulting in sales penetration of 40.9% net of 3-day payoffs versus 42.6% last year. The weighted average contract rate charged to new customers was 11.8%, up 60 basis points from the prior year. Third-party Tier 2 penetration was 15.9% versus 16.5% last year. And third-party Tier 3 was 7.6% versus 7.3% a year ago. We continue to make meaningful progress expanding across the credit spectrum. During the quarter, CAF was once again the largest Tier 2 lender, financing 22% of Tier 2 volume as compared to 10% a year ago. The observed credit performance in this space continues to be in line with our original expectations, reinforcing confidence in our decision to expand. Despite this growth in Tier 2, overall CAF penetration declined year-over-year, reflecting lower Tier 1 penetration. Increased funding costs driven by the interest rate environment resulted in CAF increasing rates in Tier 1, where customers have more funding alternatives, including cash or financing through credit unions. We view this as a normal response to the higher interest rate environment versus a structural change in behavior from CarMax customers. CAF income was $136 million, up 32% from the prior year's second quarter, driven by a $29 million decrease in the loan loss provision to $113 million. During the second quarter of the prior year, we recorded additional provision due to the worsening performance of older vintages at that time, whereas performance this year has been in line with expectations. This was partially offset by provisioning related to Tier 2 originations in the quarter from our full credit spectrum expansion. Additionally, CAF income benefited from a $17 million gain on sale recorded during the quarter and a $6 million increase in servicing fees year-over-year. This was partially offset by impacts from a $1.2 billion year-over-year reduction in outstanding receivables related to the combination of selling the residual interest for 2 non-prime securitizations and lower sales during fiscal 2026. Please note, the timing of our receivables sale differs from last year when we recorded a $27 million gain on our '25-B transaction during the third quarter. Our total reserve balance at the end of the quarter was $497 million or 3.07% of receivables held for investment. Net interest margin on the quarter was 6.6%, consistent year-over-year. As we reflect on another solid quarter, our multifaceted strategy to enable CAF income growth is hitting the mark. First and foremost, credit losses were within our expectations across both the Tier 1 and Tier 2 portfolios. Second, the refinement of our non-prime credit underwriting strategy continues to build momentum with origination volume up substantially compared to just a year ago. Third, we continue to benefit from flexibility in how we fund our receivables. Our ability to retain assets on our balance sheet when prioritizing attractive longer-term economics is now well complemented by our evolving method of utilizing off-balance sheet transactions to more quickly monetize cash flows and reduce future risk. This funding flexibility is an important advantage as we continue to grow CAF. The timing and mix of these transactions may create near-term variability in reported income and provision expense from quarter-to-quarter. However, as our evolving mix of funding strategies begins to mature and becomes more routine over the next 12 to 24 months, we would expect the variability to decrease. To provide a view into our near-term performance, we anticipate CAF's FY '27 income will be slightly lower than FY '26, all while planning to originate nearly $1 billion in Tier 2 by year-end. It is this disciplined scaling in Tier 2, along with an appropriately sized loss reserve, that should lead to significant CAF income growth over time. We plan to share more details during our upcoming strategic update. Now I'd like to turn the call back over to Keith. Keith? Keith Barr: Thank you, Jon. Before we open the line for questions, let me leave you with a few final thoughts. We are encouraged by our performance this quarter and the progress we are making across the business. While we're still early in our journey, the results we are seeing reinforce our confidence in our strategy and the opportunity ahead. Shift into GEAR is focused on strengthening our core business and getting CarMax back to sustained growth. We are steadfast in our focus on delivering the right cars at the right price, making it easier for our customers to do business with us, capturing more value from each transaction and operating more efficiently at scale. This quarter's strong unit and earnings growth reflects solid execution against these priorities. What encourages me most is that we are delivering these results while much of the work across our 4 GEAR pillars is still ahead of us. We have a solid foundation, an exceptional team, and we are adding leadership in key areas to accelerate our progress. I am confident in our ability to build on this early momentum, continue to improve our business and create long-term value for our shareholders. None of this happens without our associates, and I want to thank them again for their hard work and embracing our new strategy to create a stronger CarMax. I look forward to sharing more about our strategy, including key initiatives and milestones during our upcoming strategic update, which will take place virtually on November 3. Thank you for your continued interest in CarMax. Operator, we are ready to take questions. Operator: [Operator Instructions] Your first question comes from the line of Daniela Haigian with Morgan Stanley. Daniela Haigian: So GPU, along with a lot of other areas of the business, came in really strong this quarter, and you're now trending better than that down $200 year-over-year full year guide. How would you characterize that strength? What was the impact from greater efficiencies in COGS per unit versus maybe some of this FTC uplift or retail wholesale spreads? Keith Barr: Daniela, thank you for being here. I'll let Enrique respond to that. Enrique Mayor-Mora: Yes, we've been really pleased that we've been able to come in better than our previous outlook on GPU, certainly now expecting the year to be below a $200 decrease year-over-year. And we've done that while maintaining strong sales as we've effectively balanced demand we're seeing in the marketplace for our cars, margins, as well as efficiency gains. And it's really the balance of all 3 of those things that has allowed us to come in better, if you will, on our GPU. And specifically around cost efficiencies that we're seeing in the business, the teams have done tremendous work around rolling out different tools for our operators. We have a new part selection tool that's benefiting the organization. We switched, as we've talked about before, from a 90-day warranty to a 30-day warranty for our customers and actually given that back in terms of lower pricing for our customers as well, and that supported our sales. But overall, really pleased that the demand we're seeing in the marketplace and our ability to, again, come in better than our GPU previous outlook. Daniela Haigian: And maybe the macro part, the impact of spreads or FTC? Enrique Mayor-Mora: Yes, the FTC impact definitely is a tailwind. When we take a look overall at like our comp performance, right, on the quarter, I would say it's evenly mixed between items we control directly, so COGS efficiencies, the GPU decrease, pricing algorithm improvements, customer experience improvements. So those items that we control directly, we think it's about half of the comp performance, while the other half is really coming from what we think is the FTC enforcement benefits that we're seeing. Keith Barr: Yes. Thanks. And just to build on that a little bit. I mean, I think there's 2 aspects, as Enrique said, having a really clear strategy that focuses on the core of this business is going to drive performance. And also really the strength of the CarMax brand, that price transparency, which we have been known for, disproportionately benefits us now going forward. So now that the FTC is focused on compliance to their guidelines. We've always had more transparency, and it's helping us with price competitiveness, too. So it's execution of strategy and also the strength of the CarMax customer value proposition. Daniela Haigian: That's really helpful. And then maybe, Keith, just a broader question for you. I know it's early days here, but how do you think about CarMax's omnichannel architecture and brand positioning in this future of agentic AI, right, where these agents are doing searching and comparing on the consumer's behalf? Maybe more to hear on this in November, but curious to hear how you think about it. Keith Barr: Sure. Yes. I mean, we'll talk a little bit about AI. Again, we have an AI center of excellence here at CarMax, which basically makes sure we responsibly use AI and look at all the different use cases here we implement. And so things like our agentic voice call center now, handling 100% of stores and our customer experience center calls and helping to do that. Your question is related to search. And I think that AI is going to be actually a real benefit to the consumer to be able to go out there and really understand different vehicles and how those vehicles meet their needs. In terms of actually getting down to transactions, I think that will be really difficult for the used car industry to be negatively impacted by it because every vehicle is an individual SKU. You can see how agentic AI e-commerce will impact more CPG faster. And we think it's a real benefit to our business here to drive us to become more efficient and deliver better customer experiences. Operator: Our next question comes from Rajat Gupta with JPMorgan. Rajat Gupta: Congrats on the good execution here. I had a question on just comps for the rest of the year. If I look at normal seasonality in the business, based on the 13% comp in 2Q, normal seasonality would imply somewhere around mid-teens in the third quarter -- mid- to high teens in the third quarter. I'm curious, like, if you're seeing anything there in the macro or just the consumer backdrop that would deviate from that seasonality? That's question number 1. And then I have a follow-up. Keith Barr: Yes. Thanks, Rajat. I'll talk about the consumer. I mean, affordability is on everyone's mind. It seems like every single discussion is around that. And I think it speaks to the strength of the CarMax brand effectively and our focus on having incredibly competitive pricing. And the other word I would say about the consumer is resilient. At the end of the day, across all the different spectrums of the lower-end consumer to the higher-end consumer, we're definitely seeing resiliency there. I mean, the broader industry is down 1% -- or flat to 1%, and we posted comps of 13%. So I think having great cars, great vehicles at great pricing and making it easy to work with will drive continued growth and performance in the business. Enrique Mayor-Mora: In terms of an outlook for the back half of the year, look, we captured it in our prepared remarks. And you can see it in our bullishness around the business. We're turning our share repo back on. We're seeing continued momentum into the business. And so we're really pleased in terms of where we are and kind of what we're seeing in front of us. Rajat Gupta: Got it. And then once you lap -- you're going to lap the price cuts here in December, do you believe like the business has gotten to a place where there's enough efficiency you're able to drive to remain competitive on price to sustain the share gain? I'm curious how you feel about that based on what you've observed over the last 6 months. Keith Barr: Yes, absolutely. I mean, again, if you think about our strategy, Shift into GEAR, and running lean being that pillar and that running lean makes sure we can have a great offering and we've committed to saying we want to self-fund our price competitiveness moving forward to continue to find efficiencies in the business so that we can deliver great vehicles at exceptional prices, but not having to lower GPU moving forward. So that's the focus of the business, and I'm really confident in the team. Enrique Mayor-Mora: Yes. And I would say, certainly for FY '28, that is the intent, right? As we've talked about before, to self-fund any kind of GPU investments and lower price. I think, for this year, for the guidance we've given here, the outlook, we do expect to be lower, less than $200 year-over-year in a reduction in GPU. And I would expect some decrease in the third quarter and in the fourth quarter as well. We'll be comping over a record quarter in FY '25 in terms of GPU. So we are maintaining some flexibility in the business. We're running the business more dynamically, and that includes some flexibility. So I would expect GPUs for this year as a whole and by quarter to be down year-over-year in support of driving sales. Operator: Our next question comes from Jeff Lick with Stephens. Jeffrey Lick: Congrats on the great results. Enrique, maybe for you. The EPP gain was probably a little more than people were expecting. I was wondering if you could unpack that a little bit and just the dynamics of where that's coming from. Enrique Mayor-Mora: Yes. I would say that we were very pleased on the execution as a whole in terms of EPP and the incremental margin we're seeing from product redesign from our new product, wheel, tire and dent, all of that is in line with our expectations. And I would say our full year guidance of $35 in incremental EPP for the full year is pretty much in line, I would tell you, with where we ended this quarter being at $46 a unit, recognizing that in the first quarter, we are still rolling out nationally. We had a lot less than that. So I would tell you it's very much in line with what we had expected and where we expect to be for the year. Jon Daniels: Yes, Jeff, this is Jon. I'll just add to that kind of qualitatively. Look, I think this is something we signaled. We knew that we could make progress here. We saw an opportunity to really refresh our product. We've gotten this in the stores. It will be nationally rolled out by end of the year. Just with getting in California, our stores have done an outstanding job at selling this product. It's a more affordable product for our customers. We've tacked on what we think is a fantastic cosmetic protection product, wheel, tire and dent. Like, we saw it come in. We knew that we could deliver, and the stores have done so. Jeffrey Lick: And then just a quick 1 for Keith. Keith, on the last call, we talked about dynamic pricing that seems as it related to your previous career. And I'm just curious, I mean, the big question, as we get into the next year and we get through easy comps, is people are going to look at, okay, can they comp positive and they continue to hold GPU. Just any high-level thoughts as you've kind of been observing the data in the business on how you might give investors comfort that this just isn't an easy comp phenomenon? Keith Barr: Yes. No. Thanks, Jeff. And that's everything about Shift into GEAR is about making sure we have sustainable growth. And that's the complete focus of the team here right now is making sure that, again, we have the right level of saleable inventory. We can maintain competitive pricing. We can price dynamically depending upon where demand is and by segments. And we're continuing to evolve our pricing algorithms every single month, sharpening up, pulling in external data to make sure we have those local market pricing points, too. So we have a lot of confidence that this should be a growth business, and we should show positive comps and outperform the industry moving forward. Operator: Our next question comes from Craig Kennison with Baird. Craig Kennison: Keith, I'm wondering, could you provide examples of how you are taking friction out of the digital journey in order to impact conversion? Keith Barr: Yes, absolutely. Part of it is just really understanding what customers are looking for and making sure we're providing that information in the most easy way possible. And so a couple of examples we've used was like car details page, sharpening up like what consumers are doing in terms of search and making sure we're putting those pieces of information front and center, putting forward monthly payments, taking steps out of the purchase process and simplifying it. I think I mentioned previously, we had our EPP. We had a super complex matrix. And now the way that we're serving it up to customers, it's really self-driven by them, putting in a bit of information and serving up the exact right offerings to them, too. So it's really understanding everything from search all the way through transaction and then how we communicate with customers, just make it easier to do business with us. We're still early days in some parts of the journey. There's things that we can continue to sharpen up, and I'm really excited about having Elizabeth Dirgins join us as our new Chief Digital and Customer Officer. She's got 20-plus years in product, in financial services and in automotive. And so she's the perfect person to join our team here and really own the customer journey moving forward. Operator: Our next question comes from David Bellinger with Mizuho. David Bellinger: I have a couple of strategic ones. Just following up on the GPU outlook being down less than $200 per unit for the year. That would put you at around $2,100 and still within, call it, the legacy guardrails that have governed the business for a while. Why not be more aggressive there? Or is there some optionality to further push GPU down beyond this fiscal year if you are seeing the proper payoff in terms of unit growth? Enrique Mayor-Mora: Yes. Look, I think we -- as we've talked about, we can largely self-fund those movements, right? So Shift into focus (sic) [ GEAR ] focus on sustainable comps, sustainable EPS growth. And we recognize at the same time, we need to self-fund and find efficiencies in the system. We believe there's efficiencies to be had in the system where we don't necessarily need to go down that route as the first selection, if you will. And we're going to focus on driving efficiencies in COGS and logistics business and so on and so forth in order to actually not have to go with margins lower than our initial guidance. Keith Barr: And I think in our November strategic update, we'll be walking through each one of the pillars of the strategy and understanding really the run lean piece and the great offering piece, how interconnected those are and talk about the initiatives we have that will deliver the self-funding, which will deliver the price competitiveness and protect GPU moving forward. David Bellinger: Got it. I also want to touch on inventory levels. So CarMax has been operating pretty consistently with about 80,000 to 90,000 vehicles in any given week. So is there an opportunity to compress that number and get some more efficiency out of the inventory base, maybe add some -- another source of GPU upside if you can bypass some of that natural depreciation from holding on to vehicles? Enrique Mayor-Mora: Yes. So that is a definite area of focus that we have. So like I was just talking about in terms of efficiencies in our COGS and our logistics, an area of focus for the teams are basically inventory, right? And how can we turn our inventory faster, how do we have less unproductive transfers, unproductive holds, things like that, that will slow down your WIP, that will actually drive -- slowing down your turns. Those are items that we think are ahead of us in terms of opportunity and are definitely part of the purview of Shift into GEAR. So absolutely on our list of opportunities. Keith Barr: And we're regularly testing, understanding how this impacts the consumer. So understanding if we -- how we handle holds, is that driving sales, but slowing down our inventory turns. Transfers. We transfer over 2 million -- close to 2.5 million vehicles a year, how do we make those transfers more productive and have fewer of them over time. So it's really understanding, again, how decisions we make on holds and transfers impact sales, but also impact inventory productivity. And we got a lot of work underway there right now as part of our strategy. Operator: Our next question comes from Joe Spak with UBS. Joseph Spak: I know you mentioned you're seeing resiliency across consumers of all income, but I was wondering if you could provide any detail if you had it in terms of either traffic or conversion, however you sort of tier your customers, whether that's deciles or quintiles. And I guess just if rates stay high, other macro pressures persist, I know the goal is eventually to sort of get to self-funding that growth. But, in a tougher macro environment, sort of how do you think about the strategic plan? Is GPU still a driver to help drive that growth in that tougher macro? Keith Barr: Yes. I mean, I'll talk about consumers because we look at our consumers by different cohorts effectively on income levels. And again, resilient is the word I would use. Even at our lowest income cohort, we basically have the same number of customers year-over-year. And then, as you move up the income cohorts, we had those growing year-over-year, too, which is how our inventory developed during the quarter as well, too. So we sold more newer vehicles, higher-priced vehicles in this quarter because of the strength of that cohort. Again, that was just for this quarter, and that could change in future quarters, and we can manage our inventory dynamically based upon where we're seeing demand come from, too. So again, across all the different spectrums, we saw basically either the same number of customers or a growing number of customers in a tougher macro environment. And again, I think our price transparency and our price competitiveness is a real, real strength of CarMax. In terms of GPU, moving forward, we believe we can find the efficiencies in the business to make sure we can protect our GPU. Again, it will go down a bit in Q3 and a bit in Q4, as we've already signaled. But going forward in future fiscal years, we'll fund the GPU savings that we need to find in this business. Operator: Our next question comes from John Babcock with Barclays. John Babcock: Just quickly on that last comment about the GPUs being down in 3Q and 4Q, and I know you also mentioned that earlier. Can you just talk about what's driving that? Enrique Mayor-Mora: Sorry, you broke up a little bit. Did you ask what's driving them? John Babcock: Yes, yes. So why are you expecting GPUs to be down in 3Q and 4Q? Enrique Mayor-Mora: Yes. So consistent strategy this year, right, which we've communicated like in support of sales, we are lowering our GPUs for the year, right, in order to support our sales performance. We're driving efficiencies in the business. And as we talked about, we also have a tailwind from FTC. You mix all those things together, and we're, I believe, very effectively balancing demand, efficiencies and in order to support sales. So I mean, that's why it's very consistent with what we've said. I think the benefit has been really that we haven't had to lower our margins by as much as what we initially provided an outlook for because of that mix of benefits that we're actually seeing. John Babcock: Got you. And then next question, I noticed in going back and looking at some of the historical data that the percentage of vehicles you've been buying from dealers has trended higher over the last couple of years, and you obviously had a pretty sizable increase this quarter. Just kind of curious like is that availability driving that? Or is there something else? And then also, can you talk about the profitability on those vehicles that you're buying directly from dealers versus if you buy a vehicle from customers? Enrique Mayor-Mora: Yes, absolutely. So we've been really pleased really since inception of our acquisition of Edmunds, and they have a sales force out there that partner with our organization, and they've been driving our MaxOffer, buying cars from dealers for a few years now. This quarter is just a continued testament to the strength of that product that we have out there, where you saw 54% growth year-over-year in the quarter. Now I will say in terms of profitability, the most profitable buy that we'll have is directly from a customer, right? That is the most profitable buy, as we've always talked about. The least profitable is going to an auction house. And buying a car in an auction house, all you know there is that you paid more than anybody else for the car, but you got the car. And in between there, I'd tell you is buying a car from a dealer. So kind of midway between buying a car from a customer and going to an auction. So definitely accretive to the organization is another contributor to -- that allows us to be more competitive on our pricing as well. So very pleased with our performance this quarter. John Babcock: Okay. And then just my last question. Obviously, we've seen diesel and transportation costs rise up pretty sharply. I'm just kind of curious if you could talk a bit more about how that's impacting your business, how you're managing through that? Enrique Mayor-Mora: Yes, it's another component within our cost of sales. And -- but as we talked about this quarter, we effectively -- the teams have done a great job in driving efficiencies outside of that impact that have allowed us to be even more price competitive moving forward here, certainly in the quarter and our outlook moving forward. So we've been able to absorb it, the increase in price and diesel. But definitely, it's impacted our costs. But again, our efficiencies elsewhere have allowed us to offset it. Operator: We'll go next to Scot Ciccarelli with Truist. Scot Ciccarelli: So I know you've cut it up a few different ways. But when you look at the sharply improved sales rate, can you help us better understand how much of it was driven more by what you guys have historically called top of the funnel, more people coming into your stores and the digital channels versus how much was driven by better conversion rates? Enrique Mayor-Mora: Yes. I would say that overall, in the quarter, our web traffic actually was down by a couple of points. So -- but what we absolutely saw was our sales opportunities being up and our engaged customers being up and our conversion of those engaged customers being up as well. So what we're seeing is better quality customers coming through, if you will, right? So web traffic down, but overall kind of quality customers coming through the digital door and the physical door is up, and our conversion of those customers are up as well. Keith Barr: Yes. I think our marketing team has done an exceptional job of really driving efficiencies in the marketing funnel. And so even though that the web traffic is down a bit, again, the quality of that traffic has significantly improved, which led to all of those factors as Enrique just pointed out, too. So again, a great job by the marketing team. Scot Ciccarelli: That's helpful. And then I know it's a little difficult to tease out, and there's obviously some substitutability. But do you think your Tier 2 CAF penetration were all incremental sales? Just trying to figure out if there's a sales impact, if any, as you guys have moved a little bit lower into the credit pool on a direct basis. Jon Daniels: Yes. I appreciate the question. Yes, short answer is no. I would say it is not all incremental sales. There's always going to be some incrementality. I think we provided an outstanding offer out there. But no, this is really about us being opportunistic and moving down to the volume where -- again, our credit partners are great. They have always provided great offers to our customers. We're just taking the opportunity to take some of that volume for ourselves that's above and beyond what they would typically pay us. So no, not incremental largely at all. Operator: [Operator Instructions] We'll move next to Alex Perry with Bank of America. Alexander Perry: I just wanted to get your thoughts on how the FTC regulation could affect the GPU profiles longer term. Do you think that dealers start to alter their prices with now having to include the doc fees? And then how long should we expect the FTC tailwind to last for you? And what are you seeing sort of in terms of compliance in the overall market? Keith Barr: Sure. I mean, I can give you an example of the FTC benefit for CarMax. And I can't comment on specifically what other companies are going to do with their pricing. But when you think about our competitive pricing overall versus the broader industry, the percentage of vehicles rated great deals on Cars.com for CarMax more than doubled this quarter compared to Q2 of the previous year. So that's just significant, right? And so customers out there digitally shopping for vehicles and seeing the fact that, again, the number of great deals on third-party sites, like Cars.com, we've doubled there. So that's going to be a great, great tailwind for us for the remainder of this year. Compliance really started kind of in the May time frame. And so you probably think about it ramped up into May. So that's probably going to -- we'll lap that sometime... Enrique Mayor-Mora: Yes. And there was a bleed in naturally, not everybody complied certainly right away, and there's still some laggards, I'm sure. But really May is when we saw actually movement there. So again, we have until May and then certainly thereafter to benefit. Keith Barr: And I think the FTC sent out like 97 letters to different companies back in March telling that they're going to -- again, these aren't new guidelines. These guidelines have existed. This is basically saying they were going to enforce compliance. And so the vast majority of the industry is headed in that direction, again, which is just a tailwind for CarMax because we've already been more transparent. Alexander Perry: And just a follow-up on that. What impact do you think that has on pricing longer term as dealers move to include this -- the doc fees into a sort of all-in more transparent pricing? What impact do you think that has on sort of GPUs and the overall pricing environment? Keith Barr: I think it's just going to continue to show how price competitive we are. I think, interestingly, the noncompliance by the broader industry actually was a disadvantage for CarMax. Our customer value proposition being no haggle and being transparent to customers, again, was exactly the right thing for CarMax to do in terms of building this brand. Now that people have to comply with this, it basically shows, again, how price competitive we're going to be and being able to maintain our pricing and our GPUs moving forward. And we'll see, again, how other people choose to price. Operator: Our next question comes from Chris Pierce with Needham. Christopher Pierce: You kind of just hit on it. I really wanted to get a sense of these third-party sites. If we assume a lot of people start there, I'm just kind of curious, the tie-in between marketing and pricing. And does it really just come down to price? And I'd kind of love to get your thoughts on what you're seeing from those sites and the conversion of customers you're seeing from those sites. Then I just have one on the consumer. Keith Barr: I mean, again, we don't really talk about it in that level of detail. I mean, what we think about is our research shows that 90-plus percent of customers start their search for a vehicle online. I have to believe it's probably almost 100% in reality. And again, they're going to be searching at multiple sites. They're going to come to carmax.com, and they're going to look there. They're going to look at third-party sites. They're going to really understand kind of what vehicles are out there. And then, again, our marketing team does an exceptional job through SEO and GEO to be able to attract the right customers to our site and then convert them through the funnel, too. So again, it's making sure that you are priced competitively and that you're showing up in all the right channels, and that's how you maximize, again, customer acquisition to customer conversion. Christopher Pierce: Okay. Perfect. And I think you talked about rates up 60 bps on average maybe across the quarter and probably gone up through September here. I mean, how should we really think about the consumer being impacted here? Because it's just like you've got consumers dropping down from new car to used that are better credit quality because of new car prices, like a 1% move in rates, I think, is like -- cost hit is like $12 to $15 in monthly payments. So like, is this something investors are sort of overreacting to? Or what's sort of the right reaction? Or what level of rates is something that changes the dynamic for you guys? I just want to sort of kind of level set how investors -- how we should think about this? Jon Daniels: Sure. Yes. I'll kind of initially answer that question. When I think about it from the credit lens, I think the consumer -- you're certainly going to have -- it will be bifurcated, the higher-end prime consumer, right? They have options. They're going to go to cash. The credit unions just have obviously an advantage there where they can keep rates low. So for CarMax, in particular, CAF, you're going to see probably some leakage from using the internal financing to those channels. Now CAF in particular, we have options there, right? We can choose, and that's the benefit of a captive. We can choose at any given point to keep the rate low or raise the rate as -- and protect our finance margin. So it happens this quarter, we chose to raise rates, and we saw great comps that were coming in place. So that's an option we have in any given quarter. But I think overall, in the prime consumer, they're just going to switch to a different financing mechanism. As you get further down the credit spectrum, that's where can that payment wall be $12, $15, that might mean a lot. Terms are already extended. Can they find a way to fit that into their budget, there can be a challenge there. Our goal here is to make sure that we have a great competitive front lot price, provide great credit offerings and make it as affordable for them as possible even in the face of macroeconomic changes. Operator: We'll now take a follow-up from John Babcock with Barclays. John Babcock: Sorry for the follow-up here. Just wanted clarification, though, on the GPUs because you said down 3Q and 4Q. Is that sequentially, or that's year-over-year? Keith Barr: Year-over-year. Operator: Thank you. We don't have any further questions at this time. I'll hand the call back to Keith for any closing remarks. Keith Barr: Thank you, operator, and thanks, everyone, for joining the call today. And I appreciate all your questions and all your support, and we look forward to talking to you next quarter and then seeing you in November. Operator: Thank you. Ladies and gentlemen, that concludes the Second Quarter Fiscal Year 2027 CarMax Earnings Release Conference Call. You may now disconnect. Before you buy stock in CarMax, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and CarMax wasn't one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years. 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As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has positions in and recommends CarMax. The Motley Fool has a disclosure policy. CarMax (KMX) Q2 2027 Earnings Call Transcript was originally published by The Motley Fool

CarMax, Inc. KMX reported second-quarter fiscal 2027 earnings of $1.16 per share, which increased 81.3% year over year and beat the Zacks Consensus Estimate of 68 cents by 70.6%. Revenues increased 19.5% to $7.88 billion, surpassing the consensus mark of $7.06 billion by 11.5%. Results benefited from strong retail and wholesale volumes, higher vehicle pricing and CarMax Auto Finance growth. Retail used-unit sales increased 13.8%, while comparable-store used-unit sales advanced 13%. CarMax, Inc. price-consensus-eps-surprise-chart | CarMax, Inc. Quote For the quarter ended Aug. 31, 2026, used vehicle sales increased 19.7% year over year to $6.31 billion. Total retail used vehicle unit sales rose 13.8% to 227,391. The average retail selling price increased 6.3%, or approximately $1,600 per unit, to $27,623. CarMax bought 310,107 vehicles from consumers and dealers, up 5.9%. Purchases from consumers were flat at 262,570 vehicles, while dealer purchases surged 53.7% to 47,537. Digital capabilities supported 81% of retail unit sales, with omni sales representing 68% and online retail sales accounting for 13%. Wholesale vehicle sales increased 18.2% year over year to $1.36 billion. Wholesale unit sales climbed 15.9% to 160,344, while the average wholesale selling price increased 1.8% to $8,036. Wholesale vehicle gross profit was nearly flat at $137.6 million, as higher volumes were offset by weaker unit economics. Gross profit per wholesale unit declined by $135 to $858, highlighting the margin pressure accompanying stronger sales activity. Total gross profit increased 11.4% year over year to $799.5 million. Retail used vehicle gross profit rose 8.1% to $478.6 million, driven by higher volume. However, gross profit per used unit declined by $111 to $2,105 as KMX continued pricing actions to support sales trends. Other gross profit rose 33.1% to $183.3 million. Extended Protection Plan margin dollars increased $26.5 million, supported by higher volume and a $46 rise in margin per retail unit to $623. Service margin improved $22 million, primarily reflecting cost-of-sales efficiency gains and leverage from unit growth. Selling, general and administrative expenses increased 4.6% year over year to $628.6 million. Despite the increase, SG&A per total unit fell $157, or 8.8%, to $1,621, reflecting leverage from the sharp rise in unit sales. Ongoing cost-reduction efforts were partly offset by the annualization of materially reduced incentive-based compensation in the prior-year period and variable costs associated with higher volumes. Savings from reductions in field and corporate payroll provided an offset. CarMax remains on track to achieve $200 million in targeted SG&A exit-rate savings by the end of fiscal 2027. CarMax Auto Finance income increased 32.1% year over year to $135.6 million, aided by a lower provision for loan losses. The provision declined to $113.4 million from $142.2 million. CAF also recorded a $16.6 million gain on the sale of auto loans and benefited from $6.1 million in servicing income. CAF financed 40.9% of units sold after three-day payoffs, down from 42.6% a year earlier. However, it financed 22% of Tier 2 volume compared with 10% in the prior-year quarter. The total interest margin remained unchanged at 6.6%, while the weighted average contract rate increased 60 basis points to 11.8%. KMX ended the quarter with cash and cash equivalents of $170.5 million and inventory of $3.85 billion. Long-term debt, excluding the current portion, totaled $1.66 billion. The company generated $900.5 million in net cash from operating activities during the first six months of fiscal 2027. CarMax did not repurchase shares during the quarter but plans to resume buybacks at a modest level in the third quarter. It had $1.31 billion remaining under its authorization as of Aug. 31, 2026. KMX currently has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. General Motors Company GM reported second-quarter 2026 adjusted earnings of $3.57 per share, up 41.3% year over year. The figure beat the Zacks Consensus Estimate of $3.13 by 14.06%. Revenues increased 1.9% to $48.03 billion and surpassed the consensus estimate of $46.56 billion by 3.15%. Strong pricing, lower costs and disciplined incentives supported results. General Motors raised its full-year adjusted EBIT guidance to $14-$16 billion from $13.5-$15.5 billion. Adjusted earnings are now projected at $12-$14 per share, up from the prior range of $11.50-$13.50. Tesla, Inc. TSLA reported second-quarter 2026 adjusted earnings of 33 cents per share, which declined 17.5% year over year. The figure missed the Zacks Consensus Estimate of 50 cents by 34%. Revenues advanced 25.5% to $28.24 billion and surpassed the consensus estimate of $25.81 billion by 9.41%. Tesla expects 2026 capital expenditures to exceed $25 billion and rise further over the next two to three years. Genuine Parts Company GPC reported second-quarter 2026 adjusted earnings of $2.15 per share, beating the Zacks Consensus Estimate of $2.10 by 2.38%. The bottom line increased 2.4% from $2.10 in the year-ago quarter. Revenues rose 6% year over year to $6.54 billion and surpassed the consensus estimate of $6.39 billion by 2.36%. Genuine Parts reaffirmed its 2026 adjusted earnings guidance of $7.50-$8 per share and total sales growth outlook of 3-5.5%. Genuine Parts ended June with $2.3 billion of liquidity, including $559 million in cash. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report CarMax, Inc. (KMX) : Free Stock Analysis Report Genuine Parts Company (GPC) : Free Stock Analysis Report General Motors Company (GM) : Free Stock Analysis Report Tesla, Inc. (TSLA) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

This article first appeared on GuruFocus. - Total Sales: $7.9 billion, up 19% year-over-year. - Total Vehicles Sold: Approximately 388,000 units across retail and wholesale, up 15% year-over-year. - Used Unit Comps: Up 13%; total used unit sales grew 14%. - Wholesale Unit Sales: Up 16% year-over-year. - Average Selling Price (Retail): $27,623, up $1,630 per unit year-over-year. - Average Wholesale Selling Price: $8,036, up $145 per unit year-over-year. - Vehicles Purchased: Approximately 310,000, up 6%; approximately 262,000 from consumers (flat) and approximately 48,000 through dealers (up 54%). - Earnings Per Share: $1.16 diluted, up 81% from $0.64 last year. - Total Gross Profit: $799 million, up 11% year-over-year. - Used Retail Margin: $479 million, up 8%; gross profit per used unit of $2,105, down $111 per unit. - Wholesale Vehicle Margin: $138 million, flat; gross profit per unit of $858, down $135 per unit. - Other Gross Profit: $183 million, up $46 million or 33%; EPP margin dollars up $27 million with unit margins up $46 per unit. - Service Margin: Increased $22 million. - CarMax Auto Finance Income: $136 million, up 32% year-over-year. - CAF Originations: $2.3 billion; penetration of 40.9% net of 3-day payoffs vs. 42.6% last year. - CAF Weighted Average Contract Rate: 11.8%, up 60 basis points. - Tier 2 Penetration (Third-Party): 15.9% vs. 16.5% last year; Tier 3 was 7.6% vs. 7.3%. - CAF Loan Loss Provision: $113 million, down $29 million year-over-year. - CAF Net Interest Margin: 6.6%, consistent year-over-year. - Total Reserve Balance: $497 million, or 3.07% of receivables held for investment. - SG&A Expenses: $629 million, up 4.6%; SG&A per total unit of $1,621, a 9% leverage improvement. - Other Income: Increased $15 million, primarily from unrealized gains on equity investments. - Share Repurchase Authorization: $1.31 billion remaining; buybacks to resume at a modest pace in Q3. - Warning! GuruFocus has detected 6 Warning Signs with KMX. - Is KMX fairly valued? Test your thesis with our free DCF calculator. Release Date: September 29, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. - Used unit comps grew 13% and total units across used and wholesale grew 15%, driven by improved price competitiveness. - Earnings per share grew 81% year-over-year to $1.16, supported by robust comp growth, other gross profit expansion, and SG&A leverage. - CarMax Inc (NYSE:KMX) is resuming share repurchases at a modest level in the third quarter, signaling confidence in the business outlook. - The FTC's enhanced regulatory focus on advertised vehicle pricing is a tailwind for CarMax Inc (NYSE:KMX) due to its long-standing transparent, no-haggle pricing model. - CarMax Auto Finance income increased 32% year-over-year to $136 million, driven by a decrease in loan loss provision and a gain on sale. - Used retail margin per unit decreased $111 year-over-year to $2,105, and further GPU declines are expected in Q3 and Q4. - CAF penetration declined year-over-year to 40.9% from 42.6%, reflecting lower Tier 1 penetration due to higher funding costs. - SG&A expenses increased 4.6% year-over-year, partly due to higher corporate incentive compensation and share-based compensation. - The company expects approximately $6 million in severance expense in Q3 related to corporate cost structure streamlining. - CAF's FY27 income is anticipated to be slightly lower than FY26, with near-term variability in reported income and provision expense. Q: Daniela Haigian of Morgan Stanley asked how to characterize the strong GPU performance this quarter, and what portion came from cost-of-sales efficiencies versus the FTC uplift or retail-wholesale spreads. A: CFO Enrique Mayor-Mora said CarMax now expects full-year GPU to decline less than $200 per unit versus FY26, achieved by balancing marketplace demand, margins and efficiency gains. He credited operator tools such as a new part selection tool and the shift from a 90-day to a 30-day warranty, with the savings passed to customers in the form of lower prices. He estimated roughly half of the quarter's comp performance came from items CarMax controls directly (COGS efficiencies, GPU reductions, pricing algorithm and customer experience improvements), with the other half from FTC enforcement benefits. CEO Keith Barr added that CarMax's long-standing price transparency is now a disproportionate advantage as the industry complies with FTC guidelines. Q: Rajat Gupta of JPMorgan asked whether normal seasonality would imply mid- to high-teens comps in the third quarter, and whether anything in the macro or consumer backdrop would deviate from that pattern. A: CEO Keith Barr described the consumer as "resilient" across all income spectrums, noting the broader industry was flat to down 1% while CarMax posted 13% comps, which he attributed to great cars at great prices and an easy experience. CFO Enrique Mayor-Mora declined to give a specific comp outlook, pointing instead to the company's bullishness, continued momentum and the decision to restart share repurchases. Q: Rajat Gupta of JPMorgan followed up asking whether, after lapping the price cuts in December, CarMax will have enough efficiency to stay price competitive and sustain share gains. A: CEO Keith Barr said yes, explaining that the "run lean" pillar of the Shift into GEAR strategy is designed to self-fund price competitiveness so CarMax can offer exceptional prices without having to lower GPU going forward. CFO Enrique Mayor-Mora added that self-funding GPU investments is the intent for FY28, while FY27 GPU is still expected to be down less than $200 year-over-year, with decreases in both the third and fourth quarters as the company laps a record FY25 GPU quarter. Q: David Bellinger of Mizuho asked why CarMax isn't being more aggressive on GPU, given the down-less-than-$200 outlook still leaves GPU around $2,100 within legacy guardrails, and whether there is optionality to push GPU lower beyond this fiscal year. A: CFO Enrique Mayor-Mora said CarMax can largely self-fund those movements and believes there are efficiencies in the system, so it does not need to lead with margin cuts. He said the focus is on driving efficiencies in COGS and logistics rather than going below initial margin guidance. CEO Keith Barr added that the November strategic update will walk through how the "run lean" and "great offering" pillars interconnect to deliver self-funding, price competitiveness and GPU protection. Q: David Bellinger of Mizuho also asked whether CarMax could compress its roughly 80,000 to 90,000 vehicles of weekly inventory to gain efficiency and avoid depreciation from holding vehicles. A: CFO Enrique Mayor-Mora confirmed inventory is a definite area of focus, including faster turns and fewer unproductive transfers and holds that slow work-in-progress. CEO Keith Barr noted CarMax transfers close to 2.5 million vehicles a year and is regularly testing how holds and transfers affect both sales and inventory productivity, with significant work underway as part of the strategy. Q: Jeffrey Lick of Stephens asked about the better-than-expected EPP gain and the dynamics behind it. A: CFO Enrique Mayor-Mora said execution was strong, with incremental margin from the product redesign and the new wheel, tire and dent product in line with expectations, and the $46 per unit this quarter consistent with the full-year guidance of roughly $35 per unit in incremental EPP margin given the first-quarter national rollout. EVP of CarMax Auto Finance Jon Daniels added that the refreshed, more affordable product is in stores and will be fully rolled out nationally by year-end, with stores doing an outstanding job selling it. Q: Craig Kennison of Baird asked for examples of how CarMax is removing friction from the digital journey to improve conversion. A: CEO Keith Barr cited a redesigned car detail page that surfaces what shoppers search for, personalized monthly payments, fewer steps in the purchase process, and replacing a complex EPP matrix with a self-driven tool that serves the right offerings. He said CarMax is still early in parts of the journey and that new Chief Digital and Customer Officer Elizabeth Dirgins, with 20-plus years in product, financial services and automotive, will own the customer journey going forward. Q: Scot Ciccarelli of Truist asked how much of the sharply improved sales rate came from top-of-funnel traffic versus better conversion. A: CFO Enrique Mayor-Mora said web traffic was actually down a couple of points, but sales opportunities, engaged customers and conversion of those engaged customers were all up, meaning better-quality customers came through both digital and physical channels. CEO Keith Barr credited the marketing team with driving efficiencies in the funnel so that lower traffic was significantly higher quality. Q: Scot Ciccarelli of Truist also asked whether CAF's Tier 2 penetration represented all incremental sales. A: EVP Jon Daniels said no, it is not largely incremental. He described the move as opportunistic, taking volume that is above and beyond what third-party credit partners would typically pay, while noting those partners continue to provide great offers to CarMax customers. Q: Alex Perry of Bank of America asked how FTC regulation could affect GPU profiles longer term, how long the FTC tailwind lasts, and what compliance looks like across the market. A: CEO Keith Barr said the percentage of CarMax vehicles rated "great deals" on Cars.com more than doubled versus the prior-year second quarter, which should be a tailwind for the rest of the year. He noted compliance began ramping around May, when the FTC sent roughly 97 letters to companies in March, and that these are existing guidelines now being enforced. CFO Enrique Mayor-Mora added that not everyone complied immediately and some laggards remain, so CarMax has until May and beyond to benefit. Q: Chris Pierce of Needham asked about the tie-in between marketing and pricing on third-party sites and the conversion of customers from those sites. A For the complete transcript of the earnings call, please refer to the full earnings call transcript.