CarMax (KMX) was recently added to the S&P 500 after posting its seventh consecutive earnings surprise.
Company Description
CarMax is a national used car retailer known for its no-haggle philosophy that puts customers at ease. The company has 103 locations across the U.S.
Revenue Up 23%
On Jun 23 CarMax reported quarterly results that included revenue of $2.26 billion, a solid 23% improvement since last year. Same-store sales rose 9% and lead to net income more than tripling.
The company earned just over $100 million for the period, up from nearly $29 million in the same quarter last year. Earnings per share came in at 44 cents, topping the Zacks Consensus Estimate by 11 cents.
CarMax has now reported 7 consecutive earnings surprises.
New to the S&P 500
Last week shares of KMX were added to one of the world’s most popular indexes. With a spot in the S&P 500 being opened up after ExxonMobile acquired XTO Energy, the CarMax was selected to fill the slot.
Estimates Spike
The full-year consensus estimates for CarMax surged after 28 upward revisions. Projections are now up 22 cents, to $1.44, for this fiscal year. Next year’s estimates are up 14 cents, to $1.53.
Last year the company made $1.17 per share, making projected growth rates of 23% for fiscal 2011 and another 6% next year.
Shares of KMX are trading at 14 times forward earnings and with a PEG ratio of 1.0. While not overly enticing, still good enough to buy here.
The Chart
CarMax spiked on the earnings news but has since retraced to the pre-announcement level. If you subscribe to the “fill-the-gap” philosophy, this is a great time to get in.
Bill Wilton is the Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Growth Trader service Zacks Investment Research
