CarMax Earnings: Interest Rate Cuts Would Be Greatly Welcomed by Customers

CarMax finished fiscal 2024 with diluted EPS of $0.32 that missed the LSEG consensus of $0.49, sending the stock down over 13% during April 11 trading. We are not changing our fair value estimate and still believe the stock offers attractive value for long-term investors, but we will reassess all valuation inputs when we roll our model forward for the 10-K. We think CarMax did not have a bad quarter, but consensus expectations were probably too high and perhaps did not adequately account for no extended warranty profit sharing (an $0.08 EPS hit versus the prior year’s quarter) and this year’s quarterly tax rate up 680 basis points ($0.04 impact) to a more normal level.