CarMax Gets Target Boost at RBC

CarMax (KMX) had it price target boosted by RBC Capital Markets on Wednesday on expectations that the continued development of its omni-channel offerings will help keep supporting the used-car company’s improving rate of comparable sales.

The bank lifted its target on outperform-rating CarMax to $92 from $86 and increased their projection for first-quarter comps to growth of 7% from 2% seen previously. RBC also sees earnings of $1.49 per share for the fiscal three months that ended May 31 from a previous projection of $1.44.

CarMax will report its results ahead of the bell on Friday, according to its website. The Capital IQ consensus is for earnings of $1.49 a share and comps of 5.4%. Shares in the Richmond, Va.-based company were down 1% in afternoon trading.

“Comps should accelerate as the company continues to roll out its full suite of omni-channel capabilities to a majority of the chain by the end of (calendar 2019/fiscal 2020), applying a ‘test and learn’ philosophy along the way,” analyst Scot Ciccarelli said in a note. “CarMax is also taking initial steps to improve its price perception on online marketplaces like CarGurus.”

In the fourth quarter, CarMax said total used vehicle unit sales increased 5.6% and comparable store used unit sales rose 2.8% from the same period of 2018. RBC said that in fiscal 2020, sales headwinds should ease as depreciation rates normalize and improve the value of used cars versus new.

CarMax’s selling, general and administrative expenses rose 4.9% in the fourth quarter as the company invested in technology platforms to support growth in its online shopping program that allows drivers to complete transactions from home, in store, or a combination of both.

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