Bear of the Day: CarMax (KMX)

The automotive market is dying down. The wunderkinds of final yr have gotten the face of the bear market now. Earnings are shifting within the mistaken route. The Zacks Rank helps level out industries and shares the place earnings estimates are shifting south. It helped me uncover at present’s Bear of the Day, CarMax (KMX).

CarMax is a number one used automotive retailer in the US. The corporate operates a community of over 200 shops throughout the nation and has a powerful on-line presence by way of its web site, CarMax.com. Carmax is thought for its extensive choice of high-quality used automobiles, in addition to its no-haggle pricing and customer-friendly procuring expertise.

Lately, CarMax has skilled robust development and monetary efficiency. The corporate has persistently reported growing revenues and earnings, and has a powerful steadiness sheet with low ranges of debt.

Nevertheless, the corporate is dealing with some challenges within the close to time period that might negatively impression its earnings. One of many predominant elements is the slowdown within the used automotive market. The demand for used automobiles has been robust in recent times, however there are indicators that this demand could also be slowing down. This might result in decrease gross sales and revenues for CarMax, in addition to decrease revenue margins.

One other issue that might impression CarMax’s earnings is the growing competitors within the used automotive market. There are a selection of recent gamers getting into the market, and these firms are providing extra aggressive pricing and a wider vary of providers. This might make it tougher for CarMax to take care of its market share and profitability.

 

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CarMax has dropped to a Zacks Rank #5 (Robust Promote) as a result of 4 analysts have reduce their earnings expectations for the present yr and subsequent yr. The bearish strikes have reduce our Zacks Consensus Estimates for the present yr from $5.67 to $3.25 whereas subsequent yr’s quantity is off from $6.21 to $3.65. That represents an earnings contraction of 52% this yr.

The Automotive – Retail and Wholesale – Components business ranks within the Backside 29% of our Zacks Business Rank. There may be one inventory within the business that’s at present within the good graces of our Zacks Rank. That’s O’Reilly Automotive ORLY. Different shares within the business embody Zacks Rank #3 (Maintain) inventory Hagerty HGTY.

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O’Reilly Automotive, Inc. (ORLY) : Free Inventory Evaluation Report

CarMax, Inc. (KMX) : Free Inventory Evaluation Report

Hagerty, Inc. (HGTY) : Free Inventory Evaluation Report

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