CarMax beat on earnings this morning — sort of.
Non-GAAP profits were better than expected, but according to GAAP, CarMax actually lost money in Q4.
Shares of used-car megastore chain CarMax (NYSE: KMX) tumbled 15.6% through 1 p.m. ET Tuesday, despite beating on both the top and bottom lines in its Q4 2026 earnings report this morning.
Heading into the report, analysts forecast CarMax to earn $0.18 per share, non-GAAP, on sales of $5.65 billion. CarMax actually earned $0.34 per share on sales of $5.95 billion.
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CarMax sold 0.7% fewer vehicles retail last quarter, and 3% more wholesale, resulting in a 1% decline in total revenue — an improvement from the 1.8% decline for all of fiscal 2026.
Profitability suffered, with gross profit falling more than 9%. On the bottom line, the company reported a non-GAAP loss (as noted above), but its earnings calculated under generally accepted accounting principles (GAAP) were negative — an $0.85 per share loss for the quarter, the opposite of what one would expect with non-GAAP profit being reported as positive, and thus perhaps a shock to investors.
Full-year, CarMax still booked a GAAP profit of $1.68 per share, however, this was barely half the $3.21 per share the company earned in fiscal 2025.
Worse news for investors is that CarMax says it is cutting prices to spur sales growth, which may help the company beat analyst forecasts for near-zero sales growth this year — but could weigh on future profits. Given that analysts were already anticipating earnings would decline in fiscal 2027, it appears the company’s price-cutting strategy could result in an even steeper-than-expected earnings decline.
Granted, the stock doesn’t look terribly expensive today at a P/E ratio of 16. Without earnings growth, though, even a mid-teens P/E ratio might be too much to pay for CarMax stock.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CarMax. The Motley Fool has a disclosure policy.
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