Spotting Winners: CarMax (NYSE:KMX) And Vehicle Retailer Stocks In Q3

Wrapping up Q3 earnings, we look at the numbers and key takeaways for the vehicle retailer stocks, including CarMax (NYSE:KMX) and its peers.

Buying a vehicle is a big decision and usually the second-largest purchase behind a home for many people, so retailers that sell new and used cars try to offer selection, convenience, and customer service to shoppers. While there is online competition, especially for research and discovery, the vehicle sales market is still very fragmented and localized given the magnitude of the purchase and the logistical costs associated with moving cars over long distances. At the end of the day, a large swath of the population relies on cars to get from point A to point B, and vehicle sellers are acutely aware of this need.

The 4 vehicle retailer stocks we track reported a mixed Q3. As a group, revenues beat analysts’ consensus estimates by 1.4%.

Amidst this news, share prices of the companies have had a rough stretch. On average, they are down 11.9% since the latest earnings results.

Weakest Q3: CarMax (NYSE:KMX)

Known for its transparent, customer-centric approach and wide selection of vehicles, Carmax (NYSE:KMX) is the largest automotive retailer in the United States.

CarMax reported revenues of $6.59 billion, down 6% year on year. This print fell short of analysts’ expectations by 6.7%. Overall, it was a disappointing quarter for the company with a significant miss of analysts’ revenue and EBITDA estimates.

“While this was a challenging quarter, we remain confident in our long-term strategy and the strength of the earnings model that we have built. We are excited about the recent launch of our new brand positioning campaign `Wanna Drive?' that brings our differentiated omni-channel experience to life and underscores our ongoing commitment to empowering the customer. Also, we will continue to drive SG&A efficiency, targeting at least $150 million in incremental SG&A reductions over the next 18 months,” said Bill Nash, president and chief executive officer.

CarMax delivered the weakest performance against analyst estimates and slowest revenue growth of the whole group. Unsurprisingly, the stock is down 29.2% since reporting and currently trades at $40.40.

Read our full report on CarMax here, it’s free for active Edge members.

Best Q3: Camping World (NYSE:CWH)

Founded in 1966 as a single recreational vehicle (RV) dealership, Camping World (NYSE:CWH) still sells RVs along with boats and general merchandise for outdoor activities.

Camping World reported revenues of $1.81 billion, up 4.7% year on year, outperforming analysts’ expectations by 3.9%. The business had a stunning quarter with a beat of analysts’ EPS estimates and an impressive beat of analysts’ EBITDA estimates.

Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 39.7% since reporting. It currently trades at $10.15.

Is now the time to buy Camping World? Access our full analysis of the earnings results here, it’s free for active Edge members.

America's Car-Mart (NASDAQ:CRMT)

With a strong presence in the Southern and Central US, America’s Car-Mart (NASDAQ:CRMT) sells used cars to budget-conscious consumers.

America's Car-Mart reported revenues of $350.2 million, up 1.2% year on year, exceeding analysts’ expectations by 5.8%. Still, it was a slower quarter as it posted a significant miss of analysts’ EBITDA estimates and a significant miss of analysts’ EPS estimates.

Interestingly, the stock is up 11.3% since the results and currently trades at $25.96.

Read our full analysis of America's Car-Mart’s results here.

Lithia (NYSE:LAD)

With a strong presence in the Western US, Lithia Motors (NYSE:LAD) sells a wide range of vehicles, including new and used cars, trucks, SUVs, and luxury vehicles from various manufacturers.

Lithia reported revenues of $9.68 billion, up 4.9% year on year. This print surpassed analysts’ expectations by 2.6%. Overall, it was an exceptional quarter as it also recorded a solid beat of analysts’ EBITDA estimates and an impressive beat of analysts’ revenue estimates.

Lithia achieved the fastest revenue growth among its peers. The stock is up 10.1% since reporting and currently trades at $343.37.

Read our full, actionable report on Lithia here, it’s free for active Edge members.

Market Update

As a result of the Fed’s rate hikes in 2022 and 2023, inflation has come down from frothy levels post-pandemic. The general rise in the price of goods and services is trending towards the Fed’s 2% goal as of late, which is good news. The higher rates that fought inflation also didn't slow economic activity enough to catalyze a recession. So far, soft landing. This, combined with recent rate cuts (half a percent in September 2024 and a quarter percent in November 2024) have led to strong stock market performance in 2024. The icing on the cake for 2024 returns was Donald Trump’s victory in the U.S. Presidential Election in early November, sending major indices to all-time highs in the week following the election. Still, debates around the health of the economy and the impact of potential tariffs and corporate tax cuts remain, leaving much uncertainty around 2025.

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