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Summary

  • Shares of CarMax have been in a bit of a rut since December as the company has missed earnings projections 2 quarters in a row.
  • The Estimize community is expecting CarMax to report an 8% increase in year over year revenue while missing the Wall Street profit consensus by just a penny per share.
  • This quarter we're seeing a wide range of EPS estimates and a narrow range of revenue projections.

CarMax Inc. (NYSE:KMX) is set to report FQ1 2015 earnings before the market opens on Friday, June 20th. CarMax is the largest network of used-car dealerships in the United States by market cap, operating over 125 dealerships across 28 states. Shares of CarMax have been in a bit of a rut since December as the company has missed earnings projections 2 quarters in a row. However this quarter Wall Street is expecting modest gains from CarMax including a 2c increase in FQ1 earnings per share and a 7.3% year-over-year increase in sales. Here's what investors are expecting from CarMax on Friday.

The information below is derived from data submitted to the Estimize.com platform by a set of Buy Side and Independent analyst contributors.

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(Click Here to see Estimates and Interactive Features for CarMax)

The current Wall Street consensus expectation is for CarMax to report 66c EPS and $3.554B revenue while, the current Estimize.com consensus from Buy Side and Independent contributing analysts is 65c EPS and $3.576B in revenue. This quarter the buy-side as represented by the Estimize.com community is expecting CarMax to miss the Wall Street earnings consensus by a 1c per share while beating revenue projections by $22 million.

Over the previous 5 quarters, the consensus from Estimize has been more accurate than Wall Street in forecasting CarMax's EPS and revenue 2 and 4 times respectively. By tapping into a wider range of contributors including hedge-fund analysts, asset managers, independent research shops, students, and non professional investors, Estimize has created a data set that is more accurate than Wall Street up to 69.5% of the time.

More importantly it does a better job of representing the market's actual expectations. It has been confirmed by Deutsche Bank Quant. Research and an independent academic study from Rice University that stock prices tend to react with a more strongly associated degree to the expectation benchmark from Estimize than from the Wall Street consensus.

The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. Here we are seeing a smaller than usual differential between the two groups' expectations.

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The distribution of earnings estimates published by analysts on the Estimize.com platform range from 64c to 69c per share and from $3.540B to $3.620B in revenues. This quarter we're seeing a wide range of EPS estimates and a narrow range of revenue projections.

The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. A wide range of earnings estimates signals less agreement in the market, which could mean greater volatility post earnings.

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Over the past 3 months, the Wall Street consensus fell from 68c to 66c, while the Estimize consensus dipped from 66c to 65c. Meanwhile, the Wall Street revenue forecast declined from $3.645B to $3.554B, while the Estimize sales consensus dropped from $3.596B to $3.576B. Timeliness is correlated with accuracy and down analyst revisions at the end of the period are often a bearish indicator.

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The analyst with the highest estimate confidence rating this quarter is amirziai, who projects 64c EPS and $3.540B in revenue. amirziai self identifies as a hedge fund analyst and is ranked 81st overall among over 4,500 contributing analysts. This season amirziai has been more accurate than Wall Street in forecasting EPS and revenue an impressive 59% and 63% of the time respectively throughout 27 estimates.

Estimate confidence ratings are calculated through algorithms developed by deep quantitative research which looks at correlations between analyst track records and tendencies as they relate to future accuracy. In this case, amirziai is making a bearish call expecting CarMax to miss the Estimize consensus on both the top and bottom line.

CarMax may have missed 2 earnings forecasts in a row but contributing analysts on the Estimize.com platform are predicting that the used auto sales company can produce solid revenue this quarter. The Estimize community is expecting CarMax to report an 8% increase in year-over-year revenue while missing the Wall Street profit consensus by just a penny per share.

Disclosure: None.

Source: Here's What The Buy Side Expects From CarMax On Friday