CarMax Pulls Guidance: Shares Falling To Buyable Levels

Key Points

• CarMax had a solid Q4 and is guiding for long-term sustainable growth but removed the timeline, raising investor doubts.
• Cash flow is greatly improved and expected to remain strong in F2026 and allow substantial share repurchases. 
• Analysts' activity aligns with the stocks' range-bound conditions, and trends will unlikely change in Q2. 

CarMax NYSE: KMX shares have been trending within a range for over two years and will likely remain within it in 2025. The opportunity for investors is that uncertainty in the outlook opens an entry into an otherwise good buy, driven by end-market normalization, accelerating growth, and rapidly improving operational quality. 

The guidance causes uncertainty, reiterating a long-term outlook for sustained growth, including double-digit earnings growth, for years. The problem is that clouds in the form of tariffs and geopolitical instability have entered the picture and altered the timeline.

It may take longer than management initially anticipated to deliver the desired results. This means that investors have an extended period to build positions in this retail stock. 

“We are focused on growing the business, and we continue to make progress toward our long-term goals. However, we are removing the timeframes associated with them given the potential impact of broader macro factors.”

CarMax Falls On Strong Results: Analysts Expected A Little More 

CarMax had a solid Q4 despite falling short of analysts' earnings targets. The company grew revenue by 6.7%, outpacing MarketBeat’s consensus by more than 500 basis points and widening the margin significantly. Revenue strength was driven by gains in all segments, with total units up by 4.9%, retail units by 6.2%, and wholesale by 5.1%.

The company reports that the market share held steady, and the back-half momentum was seen as sufficient to offset the weaker first half. New stores also played a role, increasing by two for the quarter, and digital was also strong. Digital sales accounted for 15% of the net, up by 100 bps annually. 

The margin news is impressive despite falling short of the analysts' high expectations. The company widened its gross margin on volume and pricing metrics and lowered its SG&A as a percentage of the gross. The SG&A margin contracted by 770 bps and is expected to continue adding leverage to revenue gains in the coming fiscal year.

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The critical details are that earnings grew by 80% and GAAP EPS by 81%, but they fell slightly short of the consensus. 

CarMax Builds Value For Investors

CarMax posted a negative cash flow for F2024, but debt reduction is a mitigating factor. The company reduced its long-term debt and improved its debt-to-equity ratio to roughly 0.25x equity. At the same time, the company reduced its share count by 1.5% for the quarter and 1.6% for the year and will likely reduce it further in F2026.

The company has nearly $2.0 billion in available capacity, more than sufficient to sustain buybacks at the Q4 pace for several years. 

Institutional activity is also noteworthy. The institutions have been buying this stock on balance for 10 of the last 12 quarters, ramping activity to a multi-year high in Q1 as share prices dipped into the low end of their range. The takeaway is that, with a 99% ownership rate, the institutions provide a solid support base likely to buy KMX in F2026. 

Analysts' Sentiment Trends Keep KMX Stock Range Bound

Analysts' sentiment trends factor into KMX shares being range-bound in 2025. The trends are favorable because the stock is rated as a Hold and forecasts a 15% upside, aligning with the range's high-end, but headwinds are also present. The range of targets aligns with the trading range and has been relatively unchanged despite regular revisions.

The revisions themselves are telling, including numerous up-and-downgrades and price target increases and decreases over the past two years, trends unlikely to change now.

The charts show strong support within the range, but there are few signs that the market is ready to set a new high. The post-release action has the stock price down more than 5% and headed toward the low-end zone. The critical support targets are near $70 and the low end of the range at $60.