Sterne Agee CRT Cuts Price Target on CarMax (KMX) to $67 Following 3Q Miss
Sterne Agee CRT maintained a Buy rating on CarMax (NYSE: KMX), and cut the price target to $67.00 (from $68.00), following the company's 3Q earnings report. KMX reported 3Q15 EPS of $0.63 vs. $0.60 in the year-earlier period, below the Street at $0.68. Used unit comps of -0.8% missed both the Street (+1.9%) and Sterne Agee CRT's more conservative forecast of +1.0%. KMX management cited several factors that impacted comps in the quarter, including a lower supply of 0-5 year old cars, aggressive promotions and lease offerings on new vehicles, and lower subprime sales.
Analyst Ali Faghri commented, "KMX missed 3Q EPS forecasts largely due to softer used unit comps (lower SUV mix) and higher-than-expected expenses (timing of a new marketing campaign). At 16x 2016 EPS, we believe KMX shares are undervalued and downside from current levels is limited. In 2016, we expect the market to reward KMX with a higher multiple as mix headwinds moderate and comparisons ease. That said, given the recent comp deceleration, KMX will likely remain in the penalty box until the company can demonstrate that recent soft performance doesn't represent weaker franchise resonance or market share losses to new entrants."
For an analyst ratings summary and ratings history on CarMax click here. For more ratings news on CarMax click here.
Shares of CarMax closed at $53.49 yesterday.