Stifel Comments on Q1 Results from Carmax (KMX)

Stifel is out with commentary on Carmax (NYSE: KMX) following the dealer network's Q1 report.

Analyst James Albertine noted the following initial points from the report:

1. KMX reported 1Q14 EPS of $0.76 vs. our $0.67 consensus-matching estimate. Broadly speaking, KMX outperformed across all key areas of the business, though we calculate SG&A leverage drove the majority of the beat. We also note a lower than expected share count benefited EPS by $0.01 vs. our model (tax was in line with our estimate);

2. We note subprime penetration fell to 16% in 1Q14 vs. 21% in 1Q13 and 17% in 4Q13. KMX continues to expand its subprime pilot program test, originating $20.5 mm of loans in 1Q14 representing 0.8% of retail unit sales ($29.6 mm of loans financed through this program to date); and

3. We believe SG&A will become more of a focus (next 1-3 years) as new stores begin rolling into the comp base and management continues optimizing costs given learnings from test initiatives/small store format roll-outs.

Albertine has Carmax at Buy with a target price of $56.

For an analyst ratings summary and ratings history on CarMax click here. For more ratings news on CarMax click here.

Shares of CarMax closed at $45.28 yesterday.

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