CarMax (KMX) faces a mixed outlook as better unit trends, more cost cuts, and expansion plans could support results, but softer finance income, and higher gas prices may limit the pace of recovery, RBC Capital Markets said in a note emailed Wednesday.
RBC said it lowered its Q1 adjusted earnings estimate to $1.01 per share from $1.16 prior on more cautious views for gross profit per unit and CarMax Auto Finance, while expecting fiscal 2027 adjusted earnings of $2.35 per share, and fiscal 2028 net sales growth of 4.3% and adjusted earnings of $2.73 per share.
Retail unit trends improved sequentially in Q4, but retail gross profit per unit is expected to stay under pressure through fiscal 2027, with the biggest drop likely in fiscal Q1 as the company keeps pricing competitive, the investment firm said.
Finance penetration is expected to grow over the next few quarters, servicing fee income should continue from the 2025-B deal, and CarMax's fiscal 2027 plans include about $400 million in capital spending, four new stores, and more auction and reconditioning sites, according to the note.
RBC kept its sector perform rating and raised its price target to $41 from $37 by rolling its valuation forward by one year, and said recent top-line progress were encouraging, even as it questioned how long that momentum can last.
Price: $41.15, Change: $-0.51, Percent Change: -1.22%