Industry Trends - Meetings with top management of Group 1 Automotive Inc (GPI) and Penske Automotive Group Inc (PAG) highlighted industry trends in tariff responses by OEMs, new and used vehicle sales, and parts and service trends [1] - Both companies experienced increased buying by OEMs in anticipation of tariffs being imposed [2] Sales Performance - There was a sharp uptick in sales during late March, but the trend began to normalize by mid-April, establishing a new normalized run-rate by mid- to late-May and into June [3] - Consumer health remains resilient with strong in-store traffic [3] - The used car market continues to be challenging for both Group 1 Automotive and Penske Automotive [3] Stock Performance - Shares of Group 1 Automotive declined by 0.48% to $446.20, while Penske Automotive's stock increased by 1.25% to $177.56 at market close on Tuesday [4] Analyst Ratings - Analyst Rajat Gupta reiterated an Overweight rating and price target of $435 for Group 1 Automotive, while maintaining an Underweight rating and price target of $160 for Penske Automotive [1]

Company Overview - Group 1 Automotive, Inc. is a leading automotive retailer with operations primarily in the United States and the U.K., operating 150 dealerships in the U.S. and 55 in the U.K. [12] - The company sells new and used cars and light trucks, and also offers vehicle financing, insurance, service contracts, maintenance, repair services, and aftermarket automotive products [12]. Investment Ratings - Group 1 Automotive has a Zacks Rank of 3 (Hold) and a VGM Score of A, indicating a solid overall rating [13]. - The company has a Value Style Score of A, supported by attractive valuation metrics such as a forward P/E ratio of 10.96, which may appeal to value investors [13]. Earnings Estimates - In the last 60 days, four analysts have revised their earnings estimates upwards for fiscal 2025, with the Zacks Consensus Estimate increasing by $0.24 to $40.91 per share [13]. - Group 1 Automotive has an average earnings surprise of 4.4%, suggesting potential for positive performance [13]. Investment Consideration - With a solid Zacks Rank and top-tier Value and VGM Style Scores, Group 1 Automotive is recommended for investors' consideration [14].

Core Viewpoint - CarMax reported better-than-expected Q1 results, with revenue rising approximately 6% year-over-year to $7.55 billion and earnings exceeding predictions at $1.38 per share, leading to a nearly 6% surge in stock price [2] Financial Performance - CarMax experienced a 6.6% rise in same-store sales year-over-year during the quarter, indicating a positive shift after a slight decline over the past two years [2] - The company noted an improvement in gross margins, with retail gross profit per used unit nearing an all-time high due to increased demand and cost efficiencies [2] - Quarterly revenues grew 6.7% to $6.0 billion compared to $5.6 billion a year prior, contrasting with a 4.8% improvement for the S&P 500 [6] - CarMax's revenues have decreased 0.7% from $27 billion to $26 billion in the last 12 months, against a 5.5% growth for the S&P 500 [6] Valuation Comparison - CarMax's price-to-sales (P/S) ratio is 0.4 compared to 3.1 for the S&P 500, and its price-to-earnings (P/E) ratio stands at 19.7 versus 26.9 for the benchmark [6] - The current valuation of CarMax appears moderate when compared to its operational performance and financial health over recent years [3] Profitability Metrics - CarMax's operating income for the last four quarters was -$221 million, reflecting an operating margin of -0.8% [7] - The operating cash flow (OCF) for this period was $624 million, indicating an OCF margin of 2.4%, compared to 14.9% for the S&P 500 [7] - Net income for the four-quarter period was $501 million, resulting in a net income margin of 1.9%, against 11.6% for the S&P 500 [7] Financial Stability - CarMax's total debt was $19 billion at the end of the most recent quarter, with a market capitalization of $11 billion, leading to a debt-to-equity ratio of 194.8% compared to 19.4% for the S&P 500 [9] - Cash and cash equivalents amount to $247 million of the $27 billion in total assets, resulting in a cash-to-assets ratio of 0.9% [9] Downturn Resilience - KMX stock has historically performed worse than the S&P 500 during several downturns, indicating lower resilience in adverse market conditions [9] - The stock experienced a significant decline of 64.0% from a peak of $154.85 in November 2021 to $55.69 in October 2022, compared to a 25.4% drop for the S&P 500 [10] - During the COVID pandemic, KMX stock fell 56.6% from a high of $101.90 in February 2020 to $44.27 in March 2020, versus a 33.9% decline for the S&P 500 [11] Overall Assessment - CarMax's performance across key metrics indicates extremely weak operational performance and financial condition, leading to the conclusion that KMX is a very unattractive stock to buy [12][14]

Core Viewpoint - CarMax reported strong first-quarter earnings, exceeding analyst expectations, which led RBC Capital to maintain an Outperform rating and raise the price target from $80 to $81 [1]. Financial Performance - CarMax's first-quarter earnings per share were $1.38, surpassing the consensus estimate of $1.21 [1]. - Quarterly sales reached $7.55 billion, exceeding the analyst consensus estimate of $7.47 billion [1]. - Retail used unit sales increased by 9.0%, while comparable store used unit sales grew by 8.1%, both outperforming expectations [2][3]. Operational Insights - The company experienced a sequential improvement in category demand and market share gains, with each month of the quarter showing positive results, particularly April [3]. - SG&A as a percentage of gross profit improved to 73.8%, a reduction of approximately 680 basis points, attributed to cost management efforts despite rising compensation costs [4]. - CarMax repurchased $200 million in shares during the quarter, a significant increase compared to previous trends [4][5]. Challenges and Risks - CAF income declined by 3.6% to $141.7 million, primarily due to increased loan loss provisions, reflecting seasonal sales patterns and credit quality concerns [6]. - The company anticipates net sales growth of 1.9% and 3.9% for 2025 and 2026, respectively, with adjusted EPS estimates of $3.88 and $4.52 [7].

Financial Performance - CarMax reported earnings per share of $1.38, exceeding the analyst consensus estimate of $1.21 [1] - Quarterly sales reached $7.55 billion, surpassing the analyst consensus estimate of $7.47 billion [1] Business Expansion - The company opened two new stand-alone reconditioning/auction centers in El Mirage, Arizona, and Midlothian, Texas [2] Management Commentary - CEO Bill Nash highlighted the fourth consecutive quarter of positive retail comps and double-digit year-over-year earnings per share growth, emphasizing the strength of the company's earnings growth model [3] - Nash noted the importance of the omni-channel experience and the integration of associates, stores, technology, and digital capabilities in enhancing customer experience [3] Analyst Ratings and Price Targets - Truist Securities maintained a Hold rating and raised the price target from $72 to $74 [6] - RBC Capital maintained an Outperform rating and increased the price target from $80 to $81 [6] - Needham reiterated a Buy rating with a price target of $92 [6]

Core Insights - Zacks Premium provides tools for investors to enhance their stock market engagement and confidence, including daily updates, research reports, and stock screens [1][2] Zacks Style Scores - Zacks Style Scores are indicators that rate stocks based on value, growth, and momentum methodologies, helping investors identify stocks likely to outperform the market in the next 30 days [3][4] - Each stock receives a rating from A to F, with A indicating the highest potential for outperformance [4] Value Score - The Value Score focuses on identifying undervalued stocks using ratios like P/E, PEG, and Price/Sales, appealing to value investors [4] Growth Score - The Growth Score emphasizes a company's financial health and future outlook, analyzing projected and historical earnings, sales, and cash flow [5] Momentum Score - The Momentum Score identifies optimal times to invest based on price trends and earnings estimate changes, catering to momentum traders [6] VGM Score - The VGM Score combines the three Style Scores, providing a comprehensive rating that highlights stocks with attractive value, growth potential, and momentum [7] Zacks Rank - The Zacks Rank is a proprietary model that uses earnings estimate revisions to simplify portfolio building, with 1 (Strong Buy) stocks achieving an average annual return of +25.41% since 1988, significantly outperforming the S&P 500 [8][9] - There are over 800 stocks rated 1 or 2, which can be overwhelming for investors [10] Stock Example: AutoNation - AutoNation, Inc. is a leading automotive retailer in the U.S., offering vehicle sales, maintenance, and financing services [12] - Currently rated 3 (Hold) with a VGM Score of A and a Value Style Score of A, AutoNation has a forward P/E ratio of 10.48, indicating attractive valuation [12][13] - Recent upward revisions in earnings estimates have increased the Zacks Consensus Estimate to $18.75 per share, with an average earnings surprise of 1.6%, making it a noteworthy consideration for investors [13]

Core Insights - CarMax Inc. reported adjusted earnings per share of $1.38 for Q1 fiscal 2026, exceeding the Zacks Consensus Estimate of $1.18 and up from $0.97 in the prior year [1][9] - The company's revenues reached $7.55 billion, surpassing the Zacks Consensus Estimate of $7.52 billion and reflecting a 6% year-over-year increase [1] Segmental Performance - Used-vehicle net sales amounted to $6.1 billion, a 7.5% increase year-over-year, driven by a 9% rise in unit sales to 230,210 vehicles, exceeding the forecast of 207,124 units [2] - The average selling price (ASP) of used vehicles decreased by 1.5% to $26,120, which was below the projected ASP of $28,279 [2] - Comparable store used-vehicle units increased by 8.1%, with revenues rising by 6.6% year-over-year; gross profit per unit (GPU) was $2,407, up from $2,347 in the prior year but below the estimate of $2,376.8 [3] Wholesale Vehicle Performance - Wholesale vehicle revenues decreased by 0.3% year-over-year to $1.25 billion, falling short of the projection of $1.27 billion due to lower-than-expected ASP [4] - Units sold in the wholesale segment rose by 1.2% to 149,517, exceeding the forecast of 145,645; however, the ASP fell by 1.7% to $7,959, below the estimate of $8,717 [4] - Wholesale GPU was $1,047, down from $1,064 in the prior year but above the estimate of $1,033.3 [4] Other Revenues and Expenses - Other sales and revenues increased by 6.1% year-over-year to $190.4 million, missing the estimate of $196.2 million [5] - CarMax Auto Finance's income fell by 3.6% year-over-year to $141.7 million [5] - Selling, general, and administrative expenses rose by 3.3% to $659.6 million [5] Share Repurchase Activity - During the fiscal first quarter, CarMax repurchased shares worth $199.8 million and had $1.74 billion remaining under its share repurchase authorization as of May 31, 2025 [6]

Core Viewpoint - CarMax, Inc. has experienced a decline in share value, losing approximately 10% and nearing a 52-week low due to challenges related to higher prices impacting its performance [1] Company Performance - The quarterly earnings report is anticipated amidst the company's struggles with pricing pressures [1] Market Context - The company has been identified as a poor performer in the current market environment, reflecting broader challenges within the industry [1]

Core Insights - CarMax reported strong financial results for Q1 FY 2026, with total revenue of $7.55 billion, a 6% increase from the previous year, and adjusted earnings per share of $1.38, up 42% [2][4]. Financial Performance - Total revenue increased from $7.11 billion in Q1 FY 2025 to $7.55 billion in Q1 FY 2026, representing a 6% growth and beating expectations [2]. - Adjusted earnings per share rose from $0.97 to $1.38, marking a 42% increase and also exceeding expectations [2]. - Retail used vehicle unit sales grew by 9%, from 211,132 units to 230,210 units [2]. - The average price of used vehicles decreased slightly by 1.5%, from $26,526 to $26,120 [2]. Business Operations - Total vehicle unit sales increased nearly 6% year over year, driven by strong retail performance, with comparable store used unit sales up 8.1% [3]. - CarMax purchased 336,000 vehicles during the quarter, a 7% increase, and revenue from extended protection plans rose by 11% [3]. - The company emphasized effective expense management and stronger gross profit figures as key factors in its earnings growth [4]. Market Reaction - Following the positive financial report, CarMax shares surged nearly 11% in premarket trading, indicating strong investor confidence [6]. - The stock had been trading near two-year lows, with concerns about consumer sentiment, but the results suggested resilience in consumer purchasing behavior [7]. Strategic Initiatives - CarMax opened two new stand-alone centers for auctions and vehicle reconditioning in Phoenix and Dallas, aimed at supporting strong market conditions in those regions [8]. - The company accelerated its stock repurchase program, spending $200 million to buy back approximately 3 million shares, leaving $1.74 billion available for future repurchases, reflecting confidence in ongoing favorable industry conditions [9].

Group 1 - CarMax Inc (NYSE:KMX) reported better-than-expected first-quarter earnings and revenue, leading to a 3.2% increase in stock price to $66.41 [1] - The company experienced its largest increase in used vehicle sales since late 2021, with 230,000 vehicles sold in the past quarter [1] - Despite the positive earnings report, KMX is down 18.6% in 2025 and is struggling to recover from a 52-week low of $61.34 [1] Group 2 - The trading volume for KMX options has significantly increased, with 7,414 calls and 3,713 puts exchanged, which is 3.1 times the typical volume [2] - The June 62.50 put is the most popular contract expiring today, indicating heightened interest in options trading [2] - The 50-day call/put volume ratio for CarMax stock is 2.14, ranking higher than 92% of readings from the past year, suggesting bullish sentiment [2] Group 3 - Approximately 8.5% of KMX's available float is sold short, indicating potential for gains if short interest unwinds [3] - It would take shorts nearly four days to cover their positions, which could further support stock price increases [3]