The largest used car retailer in the U.S., CarMax (KMX, Financial), reported its final quarter numbers of the fiscal year 2015 on April 2, and the report card was appealing to the investors and analysts worldwide. Matching investors’ expectations on a solid quarter, CarMax exhibited solid growth in sales as well as profits for the quarter. Let’s quickly peek into the financial playbook of the car retailer and find out the key findings from the fourth quarter report card.
The report was all in green
Driven by the growth in used car vehicle sales, net sales and operating revenue for the fourth quarter rose 14.2% to $3.51 billion, from the year ago quarter. Used car sales improved about 7% in the quarter from the year-ago quarter and exhibited overall growth of about 4.4% for the entire fiscal year 2015. Meanwhile, wholesale unit sales improved 12.3% for the quarter, and by 10.5% for the entire fiscal year. Revenue for the quarter also topped the consensus figure of $3.5 billion by a slight inch.
It is notable that the CarMax Auto Finance division showed remarkable growth in income which increased 11.8% year-over-year to $90.4 million. This growth was attributed to the increase in auto loan receivables that was partially offset by a lower interest margin. Interestingly, the company has been able to originate $15.5 million in loans during the quarter.
Gross profit for the used vehicle division improved 12.7%, while that of the wholesale vehicle division rose almost 22% year-over-year. In overall, CarMax showed a whopping increase of over 44% in net earnings that stood at $143.1 million, or $0.67 per share, from $99.2 million, or $0.44 per share, recorded in the corresponding quarter last year. Analysts had projected earnings at $0.60 per share for the quarter, and the actuals clearly surpassed all the estimates.
While responding during the earnings presentation, CEO Tom Folliard stated, “We had another great year, achieving several new milestones. … Since opening our first store in 1993, we’ve now retailed well over 5 million used cars and 3 million wholesale cars, which is a testament to the strength of our brand. In fiscal 2015, the continued strong performance of our used, wholesale and CAF operations, along with the growth of our store base and our ongoing share repurchase program, contributed to our record earnings per share.”
The guidance for fiscal year 2016 is solid
While CarMax believes it has achieved a few milestones during this fiscal year, going forward the management has projected that the growth curve should remain strong as vehicle sales improve in the U.S.
Besides opening 14 new stores in the coming fiscal year 2016, the management remains optimistic on opening between 13-16 stores in each of the next three fiscal years. CarMax believes that opening at new locations would improve its popularity among customers, and thus aid in moving its sales to newer heights in the forthcoming years.
Currently, the capital expenditure is estimated to be $360 million for the fiscal year 2016, since the wholesaler intends to remodel a few of its stores besides opening new ones in the upcoming fiscal year.
Share repurchases to remain a boon for investors
Based on the share repurchase program, CarMax repurchased a total of 3.4 million shares during the quarter, and bought back 17.5 million shares in total of worth $912.8 million during the entire fiscal year. As the repurchase program still entitles investors to $2.37 billion worth of shares remaining to be bought, it is just like a cherry on the pie for them.
Such share repurchases also reflects the interest of CarMax to keep its investors contended, which in turn would possibly have a positive influence in the company’s upcoming future.
Last word
It seems that CarMax urges to take the growth path and hence the top brass has projected their growth plans going further into the new fiscal year 2016. In fact, the fourth quarter results of fiscal year 2015 have added an ace to the company’s sleeve, and now the analysts are expecting to see more growth momentum in the near future. Let’s stay tuned for the first quarter results of the fiscal year 2016 when it would be able to assess the performance of CarMax going forward.
