Used-Vehicle Affordability Slams CarMax's Q2, but We See Stock as Attractive for Long Term

CarMax reported poor fiscal 2023 second-quarter results, with diluted earnings per share of $0.79 missing the Refinitiv consensus of $1.39, causing the stock to fall over 23% on Sept. 29. We have cut our fiscal 2023 EPS modeled by 18% as well as reduced fiscal 2024 profits; this offset the time value of money, so we are not changing our fair value estimate. Macroeconomic pressure from poor consumer confidence and inflation from many areas, as well as poor used-vehicle affordability, hammered results. Comparable-store unit sales fell 8.3% year over year while comparable revenue rose 0.4%. Demand collapsed in July, and late August’s unit comps fell by a midteens percentage. The 8.3% is an improvement from the first quarter’s 12.7% decline but still at levels not seen—other than the start of the pandemic and late fiscal 2018—since fiscal 2010.