Abstract
CarMax will report results on September 29, 2026 Pre-MKt; this preview consolidates recent market expectations, last quarter’s performance, and institution commentary to frame the key earnings levers for revenue, margins, and EPS.Market Forecast
Based on current projections, revenue for this quarter is expected to be approximately 6.98 billion US dollars, down 0.69% year over year, while adjusted EPS is forecast near 0.71, a decline of 32.57% year over year; EBIT is expected to be about 169.47 million US dollars, down 30.91% year over year. No explicit guidance for gross profit margin or net profit margin is available in the projections; the setup implies ongoing trade-offs between unit throughput and per-unit profitability as pricing and mix evolve.Retail used vehicles remain the core revenue engine, with management actions centered on pricing and marketing to stimulate demand and improve conversion, which could lift unit volume but keep near-term margins constrained. The wholesale vehicles business, which delivered 1.43 billion US dollars last quarter, appears positioned to contribute incremental volume if appraisal-buy rates and auction sell-through continue to normalize alongside improved inventory turns.
Last Quarter Review
CarMax reported revenue of 8.01 billion US dollars, a gross profit margin of 11.74%, GAAP net income attributable to shareholders of 186.00 million US dollars, a net profit margin of 2.19%, and adjusted EPS of 1.31, down 5.07% year over year. The quarter featured solid execution versus expectations, with revenue exceeding consensus by 0.59 billion US dollars and adjusted EPS outperforming by 0.33.By business line, retail used vehicles generated 6.39 billion US dollars, wholesale vehicles contributed 1.43 billion US dollars, and other revenue totaled 194.55 million US dollars, while total revenue increased 6.19% year over year.
Current Quarter Outlook
Retail used vehicles
Retail used vehicles will again be the principal swing factor for this quarter’s results. The company has been leaning on targeted price reductions and stepped-up marketing to reaccelerate unit volumes, a strategy that can revive traffic and conversion but also compress per-unit gross if spreads narrow. With last quarter’s gross profit margin at 11.74% and net profit margin at 2.19%, small changes in retail gross per unit, reconditioning efficiency, and appraisal accuracy can materially influence overall margin. The balance to watch is throughput versus profitability: higher volume can help leverage fixed costs in stores and logistics, yet the incremental gross must offset any discounting or elevated reconditioning costs for the volume-driven strategy to lift EBIT and EPS. The attachment rate and yield of financing through the in-house channel are another key component of retail economics; if promotional pricing succeeds in reigniting demand without sacrificing credit quality, blended profitability can remain resilient even if retail margin per unit softens modestly. Conversely, if the mix leans toward lower-priced cars or longer terms to meet affordability, retail margin and downstream credit performance could both weigh on earnings relative to the EPS estimate of 0.71.Wholesale vehicles
Wholesale vehicles provided 1.43 billion US dollars of revenue last quarter and could serve as a stabilizer in the model this quarter if appraisal-buy rates remain firm. Analyses in recent coverage pointed to early signs of volume improvement but limited visibility on a durable earnings recovery, which aligns with a scenario in which wholesale throughput rises while the contribution margin stays sensitive to appraisal spreads and auction dynamics. The key driver here is appraisal discipline: tighter appraisal spreads that convert to consistent sell-through at auction can lift gross dollars even when retail margin is under pressure. Reconditioning cycle times also matter; if vehicles that do not meet retail criteria can be turned quickly into the wholesale channel, the company can protect turns and reduce carrying costs, supporting overall gross. Wholesale performance often correlates with the health of sourcing pipelines; higher appraisal volumes stemming from improved traffic can translate into greater wholesale consignments, supporting total gross even if retail conversion remains mixed. If the wholesale channel achieves better sell-through at acceptable fees and transportation costs, it can partially offset any compression in retail margin and assist EBIT stability around the 169.47 million US dollars forecast.Key stock drivers this quarter
The first driver is the revenue/EPS bridge relative to consensus: revenue is expected at 6.98 billion US dollars (down 0.69% year over year) and adjusted EPS at 0.71 (down 32.57% year over year), so the market will likely scrutinize mix, pricing, and SG&A leverage to see whether adjusted EPS tracks or diverges from this sharply lower year-over-year baseline. Any evidence that throughput gains are outpacing per-unit gross compression would be constructive for profit momentum, particularly if SG&A efficiencies preserve the last quarter’s margin profile. The second driver is expense discipline and operating leverage; recent staffing reductions in corporate functions suggest continued cost control. If store labor productivity and logistics costs trend favorably alongside corporate overhead savings, the combined effect could cushion EBIT against gross volatility. The third driver is credit performance and financing profitability: financing penetration supports retail economics, but earnings sensitivity rises if loss provisioning or funding costs trend higher. While the current quarter’s forecast does not include margin guidance, investors will infer margin direction from disclosures on unit economics, retail/wholesale mix, and any commentary on credit trends. The interplay of these factors will shape whether the quarter lands in line with the projected 169.47 million US dollars of EBIT or deviates due to mix and cost dynamics.Analyst Opinions
Among explicitly directional calls over the past six months, bearish views outweigh bullish, with Sell ratings from recognized institutions and the remainder skewing to Hold or Neutral; in the directional tally, bearish opinions lead by a ratio of 3:0. Barclays reiterated Sell in multiple notes, citing concerns about margin compression and demand normalization risks, and highlighted downside potential with price targets in the low-to-mid 30s, underscoring skepticism that pricing actions can sustain margin while reigniting volumes. Bank of America Securities initiated with a Sell rating, explicitly flagging demand headwinds and pressure on unit economics as central risks to forward earnings power. Several other brokers maintained Hold or Neutral stances, consistent with a cautious posture into the print rather than an optimistic inflection call.The bearish case anchors on three points that tie directly to this quarter’s setup. First, projected adjusted EPS of roughly 0.71 implies a 32.57% year-over-year decline, making further downside plausible if retail gross per unit or credit profitability trails expectations; in this framing, the volume-for-margin trade-off can disappoint if conversion gains prove insufficient to cover discounting or higher reconditioning costs. Second, EBIT is modeled to decline 30.91% year over year to about 169.47 million US dollars, a target bears see as vulnerable if wholesale mix cannot meaningfully offset retail compression; the wholesale channel can add throughput but may not deliver enough gross dollars to stabilize consolidated margins if appraisal spreads fail to improve. Third, the absence of explicit margin guidance heightens focus on SG&A and cost containment; while the recent corporate headcount reduction signals expense control, bears note that structural cost savings tend to phase in gradually and may not fully counter near-term pressure on gross, leaving limited buffer if demand softness persists.
Barclays’ framing emphasizes the risk that price reductions support traffic without a proportional rebound in retail gross per unit, implying that unit volumes could rise yet EBIT still undershoot consensus if spreads stay tight. Bank of America’s argument centers on affordability and demand elasticity, asserting that the path to durable growth likely requires more time before the full benefits of pricing, marketing, and operational refinements translate into steadier margins and EPS. Against this backdrop, the majority bearish stance expects a cautious tone on the call and sees limited catalysts to lift the revenue forecast from 6.98 billion US dollars or to materially close the year-over-year EPS gap this quarter. If results demonstrate better-than-expected retail economics, improved wholesale sell-through, and tangible SG&A leverage, that could challenge the bearish baseline; however, the prevailing institutional view remains that the burden of proof sits with execution and mix, which helps explain why explicitly directional ratings skew negative while most other coverage remains Neutral/Hold into the event.
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