How Investors Are Reacting To CarMax (KMX) Weak Q3 And US$150M Cost-Cut Plan

• Earlier this month, CarMax reported a weak Q3, with revenue falling 6% year on year and missing analysts’ estimates by 6.7%, while outlining plans to cut SG&A expenses by at least US$150,000,000 over the next 18 months.
• Management’s emphasis on long-term confidence and cost reductions, despite sector-wide softness and cautious guidance, highlights how operational discipline is becoming central to CarMax’s story.
• Next, we’ll explore how the disappointing Q3 results and planned US$150,000,000 SG&A cuts reshape CarMax’s existing investment narrative.

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CarMax Investment Narrative Recap

To own CarMax, you need to believe its omni channel used car model and nationwide footprint can convert sector weakness into durable profitability. The weak Q3 and softer guidance keep near term earnings under pressure, while the key risk is whether margin and volume headwinds, including in wholesale, persist longer than expected. The planned US$150,000,000 SG&A cuts are important to that near term margin story, but do not appear to change the core long term thesis.

The most relevant recent announcement here is CarMax’s Q3 guidance for an 8% to 12% decline in comparable used unit sales and sharply lower EPS. Coupled with the revenue miss and modest profit margins, this frames a near term catalyst around how effectively management can protect profitability through cost controls without harming customer experience or growth investments.

Yet investors also need to be aware that pressure on wholesale gross profit per unit could...

Read the full narrative on CarMax (it's free!)

CarMax’s narrative projects $29.8 billion revenue and $919.9 million earnings by 2028. This implies 1.3% yearly revenue growth and about a $361 million earnings increase from $558.5 million today.

Uncover how CarMax's forecasts yield a $39.77 fair value, a 3% downside to its current price.

Exploring Other Perspectives

Five members of the Simply Wall St Community value CarMax between US$39.77 and US$99.80 per share, highlighting very different expectations. Against this wide spread, the recent revenue miss and guidance for declining comparable sales raise practical questions about how quickly any cost savings can support margins and overall performance.

Explore 5 other fair value estimates on CarMax - why the stock might be worth over 2x more than the current price!

Build Your Own CarMax Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your CarMax research is our analysis highlighting 4 key rewards and 1 important warning sign that could impact your investment decision.
• Our free CarMax research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate CarMax's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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