Analyst Note| David Whiston, CFA, CPA, CFE |
CarMax reported a good fiscal 2021 third quarter despite comparable store unit sales of negative 0.8%, down hard from a 7.5% increase in the prior-year’s quarter. Diluted EPS of $1.42 beat the Refinitiv consensus of $1.14, and we calculate adjusted free cash flow rose 70% to $184.6 million. We are raising our fair value estimate to $93 from $89 on the time value of money since our last update, higher fiscal 2021 and 2022 revenue, and more CarMax Auto Finance income as a percent of revenue for fiscal 2021 and 2022 based on how reported results are trending. We expect good CAF results to continue given the low interest rate environment. In the quarter, CAF income grew 55%, and we calculate 19% growth excluding the impact of a large decline in the loan loss provision.