CarMax Inc. reported first quarter fiscal 2027 results with net earnings per diluted share of $1.31, surpassing the analyst consensus estimate of $0.94. Net revenues rose 6.2% to $8.014 billion, exceeding the analyst consensus estimate of $7.410 billion. Despite the earnings beat, the company signaled that pressure on vehicle margins is likely to continue as it prioritizes sales growth through competitive pricing. Following the results, Baird analyst Craig Kennison maintained an Outperform rating on the stock and raised the price target to $55 from $48. Additionally, B of A Securities analyst John Murphy maintained an Underperform rating and raised the price target from $40 to $45, while Mizuho analyst David Bellinger maintained a Neutral rating and raised the price target from $38 to $43. Needham analyst Chris Pierce also reiterated a Hold rating, noting that unit growth was driven by pricing, which the company views as a one-time lever with no longer-term plans to sacrifice margins for growth.

Sales and Unit Performance

Combined retail and wholesale unit sales increased 3.3% to 392,357 units. Total retail used vehicle unit sales increased slightly to 230,293, while comparable store used unit sales declined 0.8%. Total retail used vehicle revenues increased 4.7% driven by an increase in average retail selling price of approximately $1,200 per unit or 4.5%. Wholesale vehicle unit sales increased 8.4% to 162,064, and total wholesale revenues increased 14.0% due to higher units sold and an increase in the average wholesale selling price of approximately $400 per unit or 5.1%. Vehicle purchases from consumers and dealers declined 4.4% year over year to 322,000 units.

Profitability and Expenses

Total gross profit was $854.4 million, down 4.4% versus last year's first quarter. Retail used vehicle gross profit decreased 9.5% and retail gross profit per used unit was $2,177, down $230 from last year's all-time record, reflecting the continuation of pricing actions to drive an improved sales trend. Wholesale vehicle gross profit increased 8.3% versus the prior year's first quarter, reflecting higher wholesale unit volume.

Selling, general, and administrative (SG&A) expenses decreased 3.7% or $24.5 million to $635.2 million. SG&A per total unit improved by $118, or 6.8%, to $1,619. The company remains on track to deliver $200 million in SG&A savings this fiscal year.

CarMax Auto Finance

CarMax Auto Finance (CAF) income was $140.2 million, down 1.0% from the prior year's first quarter. The company attributed the decline to lower loan balances following a $900 million non-prime securitization completed last year, which included the sale of most related residual interests and reduced interest margins. CAF penetration expanded 150 basis points year over year to 43.3%. The allowance for loan losses of $475.0 million was 2.95% of auto loans held for investment as of May 31, 2026. Needham analyst Chris Pierce noted that the latest results included a reserve benefit of around $25 million in CAF linked to previously provisioned loans.

Outlook and Strategy

Management reiterated that it expects lower gross profit per retail unit this fiscal year, saying it will continue making pricing adjustments to stay competitive while using operational efficiencies to offset part of the margin impact. Executives maintained their full-year guidance for a roughly $200 decline in gross profit per used vehicle. The company introduced a new growth strategy centered on four pillars: improving offerings, enhancing customer experience, maximizing transaction value, and running lean operations. Pierce expressed concerns that Carvana Co remains the "largest strategic overhang," noting that if Carvana begins passing efficiency gains to consumers via lower prices, CarMax may be forced to offer pricing concessions to maintain volumes.

"I came to CarMax because I saw a strong foundation, an award-winning, people-first culture, and significant potential to unlock growth. Three months in, I am more convinced than ever that this is a business with everything it needs to thrive," said Keith Barr, President and Chief Executive Officer.

Shareholder Returns

During the first quarter of fiscal 2027, CarMax did not repurchase any shares of common stock. As of May 31, 2026, the company had $1.31 billion remaining available for repurchase under the outstanding authorization. The company also opened a stand-alone reconditioning and auction center in Locust Grove, Georgia, during the quarter. Cash and cash equivalents totaled $132.2 million as of May 31.

RBC Capital analyst Steven Shemesh has maintained a Sector Perform rating on CarMax (NYSE: KMX) while raising the price target to $45 from $41. The adjustment reflects a revised outlook on the company's valuation.

Rating and Price Target

The analyst retained the Sector Perform designation, indicating an expectation for the stock to perform in line with the broader sector. The price target increase to $45 suggests an updated assessment of the company's potential upside.