CarMax Inc. (KMX - Analyst Report) posted earnings per share of 60 cents in the third quarter of fiscal 2015, ended Nov 30, 2014, highlighting an increase of 27.7% from 47 cents a year ago. Earnings also surpassed the Zacks Consensus Estimate of 54 cents. The company recorded better results in the reported quarter due to strong performance in used, wholesale and CarMax Auto Finance (CAF) operations, together with the increase in its store base and the ongoing share repurchase program.

Carmax, Inc - Quarterly EPS (BNRI) | FindTheBest

Net sales and operating revenues in the quarter rose 15.8% year over year to $3.41 billion, exceeding the Zacks Consensus Estimate of $3.26 billion. The year-over-year improvement was mainly driven by increased used vehicle, new vehicle and wholesale vehicle sales.

Used vehicle revenues appreciated 16.6% to $2.8 billion in the quarter, driven by higher unit sales. Unit sales of used vehicles increased 14% to 139,158 vehicles and their average selling price increased 2.3% to $19,914. Comparable-store used vehicle unit sales rose 7.4% in the quarter. The improvement can be attributed to improved footfall in stores.

New vehicle revenues improved 9% to $54.6 million on higher unit sales. Unit sales of new vehicles increased 10.5% to 2,009 vehicles, while their average selling price decreased 1.4% to $27,056.

Wholesale vehicle revenues rose 10.2% to $481.7 million. Unit sales increased 10% to 90,988 vehicles. Wholesale unit sales benefited due to increased traffic and higher store base. Average selling price of wholesale vehicles was at par year over year, at $5,124.

Other sales and revenues rose 30.2% to $74.5 million on an increase in extended protection plan (EPP) revenues. EPP revenues, including extended service plan (ESP) and guaranteed asset protection revenues, increased 26.5% to $61.7 million.

Gross profit increased 17% to $446.6 million or 13.1% of sales from $381.7 million or 13% of sales in the year-ago quarter.

CarMax Auto Finance (CAF)

CAF reported a 6.9% increase in income to $89.7 million from $83.9 million in the year-earlier quarter. The improvement was primarily driven by an increase in average managed receivables, partially offset by a lower total interest margin rate.

Store Openings

During the third quarter of fiscal 2015, CarMax opened four stores. Two stores were opened in new markets – Tupelo, MS; and Reno, NV and the other two stores were inaugurated in the existing market of Portland, OR and the Raleigh, NC market. In the first nine months of 2015, the company opened 12 stores. The company intends to open 13 used car superstores in fiscal 2015 and 10–15 superstores in each of the next two fiscal years.

Share Repurchase Program

During the third quarter of fiscal 2015, CarMax spent $327.2 million to repurchase 6.2 million shares under its existing share repurchase program. As of Nov 30, 2014, the company had $2.58 million of authorization remaining under its repurchase program.

Financial Position

CarMax had cash and cash equivalents of $189.9 million as of Nov 30, 2014, down from $664.8 million as of Nov 30, 2013. Total debt (including financing and capital lease obligations, and non-recourse notes payable) rose to $8.8 billion as of Nov 30, 2014 from $7.3 billion as of Nov 30, 2013.

In the first nine months of fiscal 2015, CarMax had a cash outflow of $784.6 million from operations, compared with $493.1 million in the prior-year period. Meanwhile, capital expenditures increased to $238.9 million from $212.9 million in the first nine months of fiscal 2014. The company expects capital expenditure of around $300 million for fiscal 2015.

CarMax currently carries a Zacks Rank #3 (Hold). Better-ranked stocks worth considering include O'Reilly Automotive Inc. (ORLY - Analyst Report), PACCAR Inc. (PCAR - Analyst Report) and Harley-Davidson, Inc. (HOG - Analyst Report). All these stocks have a Zacks Rank #2 (Buy).