CarMax stock surged 15.3% due to strong quarterly earnings, benefiting from a diverging car market.

From Nasdaq, Inc.: 2024-09-28 07:15:00

Shares of CarMax Inc. (NYSE: KMX) surged by over 15.3% in one day due to strong quarterly earnings amid a diverging car market. Companies like Advance Auto Parts Inc. (NYSE: AAP) and AutoZone Inc. (NYSE: AZO) are also benefitting. The weakening consumer market, driven by rising delinquencies, falling savings rates, and increased vehicle repossession rates, is impacting the car industry.

CarMax reported a decline in wholesale vehicle sales but an increase in used vehicle sales. The company purchased more cars from dealerships due to declining car values, while consumers opted to sell fewer vehicles. Provision for loan losses in CarMax’s financial services division increased due to worsening financial conditions. Despite these challenges, CarMax’s EPS increased by 13.3%.

CarMax managed to pivot to profitability by increasing cash flow through inventory management and stock buybacks. Management’s strategic decisions have positioned the company for success, leading to optimistic price targets from analysts and a decline in short interest. This positive outlook indicates potential growth for CarMax stock in the future.



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