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by David Gibbs

Earnings: Q2 profits of $0.48 vs. estimates of $0.40 and $0.46 in Q2 last year.

Revenue: Up 13% to $2.34 billion vs. estimates of $2.27 billion.

Management noted on the call that CarMax’s (KMX) “4% increase in comparable store used units was driven by an improvement in sales conversion. Customer traffic was similar to last year’s second quarter, notwithstanding the absence of the spike in traffic provided by last year’s “cash for clunkers” program.”

Wholesale unit sales increased 20%.

“The improvement reflected increases in both appraisal traffic and our appraisal buy rate. Similar to the last several quarters, we believe the rebound in the appraisal buy rate has been primarily driven by the strength of wholesale industry used vehicle pricing, which has allowed us to provide higher appraisal offers.”

Comment: Richmond, VA based CarMax Inc. (NYSE: KMX) popped 8.5% following its better-than-expected earnings release this past Wednesday before the bell. $0.02 YoY EPS gains were really closer to $0.12, as KMX management estimated that $0.10 of 2Q09 results were related to Cash for Clunkers. S&P reiterated its Hold rating on shares and $26 target, noting that KMX’s “balance sheet supports the planned resumption of new store additions.”

As the largest used car retailer in the U.S., KMX represents a good barometer of U.S. consumers’ attitudes towards durable goods. During a downturn, one would expect the performance of a company selling used cars to improve relative to that of a company selling higher-priced new cars, and that is exactly what we have seen. After missing analyst estimates 5 times in a row during ’08-’09, KMX has now beaten estimates 7 quarters in a row and is threatening its all-time highs.

Shares tacked an additional 4.5% onto Wednesday’s 8.5% move to finish the week at $27.53, a new 52-week high. If you’re looking for a trade, watch for a breakout above all-time highs of $29.44. If you’re looking for an investment, allow for a bit of a consolidation, as there’s a lot of ‘air’ below last week's move. KMX should prove relatively recession-resistant, and is a good play for anyone looking to take advantage of a weak U.S. economic outlook.

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Disclosure: No holdings in KMX.

Source: Earnings Cheat Sheet: CarMax Jumps as Consumers Continue To Favor Used Cars