Why CarMax Stock Plummeted Today
Key Points
CarMax stock sank even though the company posted fiscal Q1 beats.
The company's forward guidance wasn't enough to excite investors.
Bearish momentum for the broader market likely added to valuation pressures.
- 10 stocks we like better than CarMax ›
CarMax (NYSE: KMX) stock lost ground in Wednesday's trading even though the company recently reported better-than-expected quarterly results. The company's share price fell roughly 9% in a daily session that saw the S&P 500 fall approximately 1.2%, and the Nasdaq Composite decline roughly 1.3%.
Before the market opened this morning, CarMax published results for the first quarter of its 2027 fiscal year -- a period that ended May 31. The company actually posted sales and earnings for fiscal Q1 that beat the market's expectations, but forward guidance wound up coming in below the market's targets.
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CarMax stock sank despite quarterly beats
CarMax recorded earnings per share of $1.31 on revenue of $8.01 billion. The company's per-share profit topped the average analyst estimate by $0.37, and revenue came in roughly $580 million higher than the average target.
CarMax's sales rose roughly 6.1% year over year in fiscal Q1, and combined retail and wholesale unit sales were up 3.3% compared to the prior-year period. On the other hand, earnings per share actually declined 5.1% year over year compared to the profit of $1.38 per share recorded by the business in the prior-year period.
What's next for CarMax?
With its fiscal Q1 report, CarMax stated that it was seeing some pressure on selling, general, and administrative expenses -- but management also said that it expected to reach its target for roughly $200 million in category savings in the fiscal year. The company also said that it was on track for roughly $35 per unit in incremental extended protection plans (EPP) in the fiscal year and that it expected its national EPP redesign rollout to be completed in the current quarter. CarMax's fiscal Q1 results actually looked quite solid, but some investors were apparently looking for stronger forward guidance.
Should you buy stock in CarMax right now?
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CarMax. The Motley Fool has a disclosure policy.
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