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CarMax Q4 In Line, Lower Pricing Lifts Sales but Weighs on Profit, Truist Says

-- CarMax's (KMX) fiscal Q4 results were in line with estimates, suggesting it can drive higher sales through more aggressive pricing, though at the expense of lower gross profit dollars, while comps have softened against stronger comparisons so far in Q1, Truist Securities said Tuesday in a note.

The company's shift toward more competitive pricing, primarily via lower GPUs, helped drive an improvement in Q4 used unit comps. However, it came at the cost of lower gross profit. The company is targeting a similar reduction in GPUs throughout 2026 and 2027, with Q1 expected to decline further as it laps a record-high GPU.

CarMax also raised its annual selling, general and administrative cost reduction goal to nearly $200 million from $150 million, though this is expected to be largely offset by higher compensation expense.

Truist noted that balancing a better customer experience with lower costs may be challenging and expects annual SG&A expenses to be flat or slightly down in calendar year 2026 and decline more sharply in 2027 as comp expense normalizes.

The brokerage said it is lowering its calendar year 2026 and 2027 earnings per share estimates to $2.45 and $3.25 from $3.10 and $3.50, respectively.

Truist maintained a hold rating on CarMax with a $37 price target.

Shares of the company were down more than 16% in Tuesday trading.

Price: $40.84, Change: $-8.24, Percent Change: -16.79%

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