CarMax posted a broad earnings beat on September 29, with second-quarter EPS of $1.16, up 81 percent from a year ago. Revenue rose 19.5 percent to $7.9 billion, used retail comps grew 13 percent, and the company said it will resume share repurchases this quarter after a long pause.
The setup
The used-car market has been rough for two years, with sluggish affordability and high loan rates pressuring demand. CarMax’s results show the company winning share anyway. Management credited its Shift into GEAR strategy, which emphasizes competitive pricing, a redesigned extended protection plan, wider financing options, and lower costs.
Analysts expected about $0.73 in EPS and $7.03 billion in revenue, so the print cleared both bars by a wide margin. Shares rose more than 6 percent in premarket trading to near $60 after closing at $56.55 the day before.
Key numbers from the quarter
| Metric | Q2 FY2027 result | Change |
| Diluted EPS | $1.16 | Up 81.3 percent from $0.64 |
| Total revenue | $7.9 billion | Up 19.5 percent |
| Used retail comps | Up 13 percent | Industry roughly flat to down 1 percent |
| Vehicles sold, retail and wholesale | About 388,000 | Up 15 percent |
| Total gross profit | $799 million | Up 11 percent |
| CarMax Auto Finance income | $135.6 million | Up 32.1 percent |
Why earnings grew faster than sales
The beat came from several levers working at once. Extended protection plan margin per retail unit rose $46 to $623. Auto finance income jumped 32 percent as the loan-loss provision fell $28.8 million from a year ago. SG&A grew just 4.6 percent while units climbed 15 percent, meaning overhead per unit improved by $157, or 8.8 percent.
Retail gross profit per unit fell $111 to $2,105, which management framed as a deliberate choice. The company lowered prices to win customers, then made up the difference through volume, service, protection products, and cost cuts. The strategy showed up directly in the comp growth, which ran about 14 points ahead of the overall used-car market.
What buybacks mean for shareholders
CarMax has $1.31 billion of repurchase authorization remaining. Management plans to restart the program in the third fiscal quarter at a modest pace, below the average quarterly run rate from before the pause. The table shows the shareholder-return picture.
| Item | Amount |
| Repurchase authorization remaining | $1.31 billion |
| Buyback pace, Q3 FY2027 | Modest, below pre-pause average |
| SG&A savings target, exit rate | $200 million by end of fiscal 2027 |
| Expected severance charge, Q3 | About $6 million |
| Pension settlement charges, over time | About $50 million |
Buybacks at current prices retire more shares per dollar than they did when the stock traded near its 52-week high of $65.28. A buyer purchasing CarMax today alongside management gets a shrinking share count and a cost base falling by hundreds of millions of dollars.
What to watch
- GPU guidance. Management now expects full-year retail gross profit per unit to decline less than the $200 previously guided. Third and fourth quarters should still show declines, but smaller ones.
- Financing costs. CarMax Auto Finance depends on securitization markets and consumer credit. The weighted average contract rate hit 11.8 percent, up 60 basis points year over year, and higher rates could cool demand.
- Loan losses. The allowance for loan losses rose to 3.07 percent of loans held for investment, up from 2.95 percent in May. Tier 2 originations are growing, which carries higher expected loss rates by design.
- The November 3 strategic update. Management will lay out growth plans and milestones at a virtual event, which is the next scheduled catalyst for the stock.
Bottom line
The quarter shows a retailer executing well in a hard market: 13 percent comps against a flat industry, SG&A discipline, and a buyback restarting. Risks sit in credit costs and used-vehicle affordability. With the stock near the top of its 52-week range, most of the beat is likely already priced in, but the cost cuts and share repurchases give the story room to run.
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