On September 29, CarMax, Inc. (NYSE:KMX) reported results for the second quarter of fiscal 2027 ended August 31, 2026. The company delivered a stronger-than-expected quarter as higher vehicle sales and controlled expenses drove earnings.
The company reported revenue of $7.9 billion, up 19.5% year-over-year. Combined retail and wholesale unit sales increased 14.7%, while net earnings per diluted share rose 81.3% to $1.16. The results came well ahead of market expectations of $7.03 billion in revenue and $0.75 in EPS.
CarMax, Inc. is benefiting from solid execution and early progress on its “Shift into GEAR” strategy, which focuses on strengthening its core business and returning the company to sustained growth. The company also said it plans to resume share repurchases in the third fiscal quarter.
CarMax, Inc. (NYSE) has rallied nearly 40% this year, but it still didn’t make our list of 10 Stocks That Will Go to the Moon According to Reddit. Investors may want to see which stocks Reddit believes have even more upside from here.
Higher Sales Support the Turnaround
The company’s retail used-vehicle business was a key driver. Retail used unit sales increased 13.8%, while comparable-store used unit sales rose 13.0%. The increase in comparable sales shows that the pricing strategy is helping attract customers and support higher vehicle volumes.
At the same time, CarMax, Inc. kept a tight lid on costs as selling, general and administrative (SG&A) expenses increased just 4.6%, much slower than the 19.5% increase in revenue. If the company can maintain this gap between revenue growth and expense growth, it could create additional operating leverage and support earnings growth.
Margin Pressure Remains a Concern
However, the stronger sales numbers come with some pressure on profitability per vehicle. Gross profit per retail used vehicle declined to $2,105 from $2,216 a year earlier. Gross profit per wholesale unit also fell to $858, down $135.
This shows that the company is currently generating stronger earnings with the help of higher sales volumes and cost control, while profitability on each vehicle remains under pressure. Therefore, sustaining the turnaround could depend not only on maintaining unit growth but also on stabilizing per-unit margins.
Additionally, auto affordability and elevated interest rates remain important risks for used-car demand and CarMax Auto Finance.
CarMax isn’t the only auto retailer growing volumes while margins remain under pressure. See how this stock is trying to outrun the same profitability squeeze.
What the Numbers Say
Hedge fund interest in the stock increased during the second quarter. According to Insider Monkey‘s database, 58 hedge funds held CarMax, Inc. at the end of the second quarter, up from 51 in the first quarter.
Some might argue that the stock’s performance also suggests that investors are already pricing in a meaningful continuation of the turnaround. As of October 2, CarMax, Inc. had gained nearly 40% year-to-date.
Valuation is another factor that should be considered. CarMax, Inc.’s trailing P/E ratio is 35.30, while its forward P/E stands at 21.55, as of September 22. While this does not make the stock look obviously cheap, the forward valuation could become more reasonable if the recent earnings recovery can continue. The latest results give investors solid evidence that the turnaround is gaining traction.
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