CarMax (KMX 61.17, +1.91) has jumped 3.2% after reporting better than expected results for the first quarter.
The used car dealer reported above-consensus first quarter earnings of $1.13 per share on a 10.1% year-over-year spike in revenue to $4.54 billion, which also exceeded expectations.
The better than expected quarter from CarMax comes at a time where market participants have become more sensitive to new information that relates to the auto market, which has softened over the past year. Monthly auto sales have been declining since the start of 2017 and the level of sales in May (16.66 million SAAR) was just above lows from 2015 (16.23 million SAAR) and 2016 (16.57 million SAAR).
As for CarMax, the company's first quarter used unit sales in comparable stores grew 8.2% while total used unit sales climbed 14.1% to 195,273. The company identified improved conversion rates as one of the factors that drove the increase. In addition, the company believes that the delay of federal income tax refunds shifted some sales from the fourth quarter to the first quarter.
The average selling price of used vehicles fell 1.9% year-over-year to $19,478 while the average price of wholesale vehicles fell 2.9% to $5,113.
Third-party Tier 3 sales mix declined to 10.0% of used unit sales from 11.2% one year ago. Tightening of credit standards at one of the company's Tier 3 credit providers contributed to the decline.
Wholesale vehicle units were little changed year-over-year, ticking down to 103,443 from 103,462. Contributions from growth in the company's store base were offset by lower appraisal traffic. Vehicles aged between seven and nine years remained in short supply.
Other sales and revenue grew 12.3% year-over-year to $145.60 million. The growth occurred due to improved revenue from extended protection plans.
CarMax Auto Finance income grew 8.5% year-over-year to $109.40 million.