CarMax reports second-quarter earnings Tuesday before the open, with analysts expecting 71 cents a share on revenue of $6.94B for the quarter ended Aug. 31.
That would mark year-over-year growth of 11.5% in earnings and 5.3% in revenue. The stock has climbed 48% in 2026, beating a 13% advance in the S&P 500.
Peers have gone the other way. Carvana has tumbled 23% year-to-date, while AutoNation, Asbury Automotive Group, and Group 1 Automotive have all posted double-digit declines.
The turnaround is running on cost cuts
CarMax laid off 145 corporate employees this month, roughly 4% of its corporate headcount and the third round of cuts in under a year.
About 60 of those let go worked in technology, and the cuts reached the Richmond-area offices, Dallas, Atlanta, and the Edmunds research subsidiary.
Earlier rounds hit 350 jobs in October 2025 and 230 more in January 2026. The company says it remains on track for $200M in exit-rate SG&A savings by the end of fiscal 2027.
CEO Keith Barr, who was named to the top job earlier this year after predecessor Bill Nash was fired, unveiled a four-pillar plan in June covering pricing, digital, in-house financing, and reconditioning costs.
Valuation has outrun the evidence
Barr's first quarter delivered earnings of $1.31 a share against estimates near 91 cents, with sales climbing 6.2% to $8.01B. Profit still fell to $185.6M from $210.4M, squeezed by the price cuts used to move metal. Gross profit per retail used unit dropped $207.
CarMax trades at roughly 20 times forward earnings, more than double its 2025 low and above Nvidia on that measure.
Of 21 analysts tracked, 16 recommend holding the stock. Stephens raised its target to $74 last week, while Morgan Stanley lifted its to $47 and flagged negative risk-reward skew.
"Beyond the quarter, the bigger debate is whether recent improvement is structural or cyclical," Morgan Stanley analyst Daniela Haigian wrote on Sept. 23.
The backdrop has hardened. The Federal Reserve hiked rates, fuel costs are elevated, and used-car prices averaged $27.24K in August, the highest since December 2022.
Cheaper used cars can win budget-constrained buyers, but stretched households skip big-ticket purchases entirely. CarMax stock has fallen after each of the past four earnings reports, several of which beat on profit.
