Text size

The weaker-than-expected report snaps a streak of four quarterly earnings “beats” for CarMax.

Justin Sullivan/Getty Images

Stock in auto dealer


CarMax

is dropping after its fiscal second quarter earnings disappointed investors.

The company reported $1.72 in per-share earnings from $8 billion in sales. Wall Street was looking for earnings of $1.87 a share from $6.9 billion in sales.

Sales were great, but profit margins weren’t as strong as expected. CarMax reported operating profit margins of about 5%, below the 6% analysts were expecting. Gross profit earned per used vehicle sold was about $2,185, down from $2,214 earned in the same quarterly period of 2020.

CarMax (ticker: KMX) shares are down almost 9% in premarket trading.

S&P 500
and

Dow Jones Industrial Average
futures are both up about 0.4%. The disappointing earnings will eat into recent gains for the stock. Shares, coming into Thursday, have gained about 55% year to date, far better than the 16% comparable gain of the S&P.

Management doesn’t sound disappointed. “Our omni-channel platform, in combination with our unique customer offerings….led to a record level of used sales for the second quarter and an all-time record for wholesale vehicle sales,” said CEO Bill Nash in the company’s news release.

Omni-channel for CarMax refers, in part, to selling cars online as well as in person.

Actual results look fine. Net interest income and profit margins, for instance, improved year over year at the company’s finance arm. Earnings reports are all about expectations, however. The weaker-than-expected report snaps a streak of four quarterly earnings “beats” coming out of the depths of the 2020 Covid-induced economic downturn.

Management hosts a conference call at 9 a.m. Eastern time to discuss results. Analysts and investors will be interested in hearing about how the global automotive semiconductor shortage is impacting new and used car inventories.

A lack of chips has resulted in the global auto industry building roughly 5 million or 6 million less cars than it could have in 2021.

Write to Al Root at allen.root@dowjones.com

Read More