What happened
Shares of CarMax (NYSE:KMX) jumped nearly 13% last month, according to data provided by S&P Global Market Intelligence, following the used-car retailer's strong second-quarter results.
So what
CarMax's revenue rose 9.7% year over year to $4.39 billion. Net income leapt 11.7% to $181.4 million. And earnings per share, boosted by stock buybacks, jumped 16.7% to $0.98. Those figures came in well above Wall Street's expectations of $4.27 billion in revenue and $0.95 in EPS.
IMAGE SOURCE: CARMAX.
CarMax sold 5.3% more cars on a comparable-store basis and 11.1% more on an overall basis. Used-vehicle gross profit per unit increased to $2,178, compared to $2,160 in the year-ago quarter. More cars sold and higher profit per vehicle -- that's a powerful combination that's helping to fuel CarMax's results.
Now what
CarMax has a unique value proposition in the used-car industry. The company takes something that's dreaded by many car shoppers -- the intense negotiating that's often required as part of the typical used-car buying experience -- and eliminates it. The "no-haggle" price for a CarMax vehicle is the same online as it is on the lot. All of its cars are quality certified and come with a five-day money-back guarantee. Together, these features make shopping at a CarMax a much less stressful, and even enjoyable, experience for many used car buyers.
In turn, CarMax should continue to take share in the used-car industry. The company plans to open 15 new stores over the next 12 months. The company's national expansion strategy, combined with growing comp sales at its existing 180-strong store base, should drive steady increases in revenue and earnings for many years to come.
Say Goodbye to the Old iPhone: This Could Be 40X BetteriPhone mania is back, and there's potentially billions up for grabs. But if you think Apple is the best way to play the pending iPhone tsunami, think again. One tiny company holds the patents to an invaluable, tiny component inside Apple's newest iPhone -- and Apple has to pay up every time it puts this technology in its phones.
Don't wait until the name of this company is on everyone's lips.
