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CarMax Bets On Lower Prices To Jumpstart Sales After 47% Profit Drop

Benzinga · 1d ago

CarMax Inc. (NYSE:KMX) reported its fiscal third-quarter results on Thursday, broadly in line with its guidance range.

Here are the key analyst takeaways:

  • Stephens analyst Jeff Lick maintained an Equal-Weight rating, while reducing the price target from $39 to $36.
  • RBC Capital Markets analyst Steven Shemesh reiterated a Sector Perform rating, while raising the price target from $34 to $37.

Check out other analyst stock ratings.

Stephens: CarMax reported a 9% decline in same-store units, while total units were down 7.2%, Lick said in a note. Retail gross profit per unit (GPU) contracted by 3.1% year-on-year to $2,235 in the fiscal third quarter, while EBITDA declined 26.3% to $219 million and earnings came in at 43 cents per share, down 47.1%, he added.

Management indicated plans to cut prices to trigger unit growth, without specifying the extent of the decrease, the analyst stated.  

The company had increased advertising in the third quarter and plans to continue in the fourth quarter, Lick noted. "KMX highlighted that F4Q26 ad spend would be up similarly in terms of direction, but not quite the same magnitude," he further wrote.

RBC Capital Markets: In line with CarMax's plan to reduce its SG&A expenses by $150 million by end of fiscal 2027, the company reduced its CEC workforce by around 30% in the third quarter with technology enhancements, Shemesh said. CarMax Auto Finance (CAF) income grew 9% year-on-year to $175 million, topping the consensus of $153 million, he added.

"KMX continued to see solid performance within older, higher mileage vehicles as the company shared that they represented >40% of the qtrs sales; this was an increase of +5% both q/q and compared to 3Q YAG," the analyst wrote.

KMX Price Action: CarMax shares were down 2.16% at $38.49 at the time of publication on Friday, according to Benzinga Pro data.

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