CarMax Gears Up to Report Q2 Earnings: Here's What to Expect

CarMax (KMX) is scheduled to release Q2 fiscal 2026 results on Sept. 25, with consensus estimates at $1.03 EPS, implying 21.2% year-over-year growth, and $7.05 billion in revenue, reflecting 0.6% growth. While the company anticipates continued service gross margin improvements from efficiency initiatives, potential headwinds include softening wholesale vehicle prices due to the rising average age of U.S. vehicles, which could pressure Q2 margins. Zacks' model does not conclusively predict an earnings beat for KMX, citing a negative Earnings ESP of -6.67% despite a Zacks Rank #3 (Hold).

Analysis

CarMax is approaching its second-quarter fiscal 2026 earnings release with a mixed outlook, characterized by projected earnings growth against significant margin headwinds. Consensus estimates point to a 21.2% year-over-year increase in EPS to $1.03 but only a marginal 0.6% rise in revenue to $7.05 billion, suggesting profitability initiatives are the primary growth driver. A key positive factor is the anticipated improvement in service gross margin, building on a $30 million year-over-year gain in the first quarter, propelled by new fees and ongoing efficiency gains. However, this is counterbalanced by considerable pressure in the wholesale vehicle segment. The rising average age of U.S. light vehicles, now at 12.8 years, is softening wholesale demand and prices. This trend was evident in Q1, where the average wholesale selling price declined to $7,959 and gross profit per unit fell to $1,047. This margin compression in the wholesale business is expected to have persisted in the second quarter. Underscoring the cautious sentiment, our model does not predict an earnings beat, highlighted by a negative Earnings ESP of -6.67%, which indicates that the most recent analyst estimates are below the consensus.

Key Decisions for Investors

• Investors should exercise caution heading into the earnings report, as the negative Earnings ESP of -6.67% and downward estimate revision signal a heightened risk of an earnings miss or disappointing guidance.
• Scrutinize the gross profit performance of the service segment versus the wholesale segment, as the key debate is whether strength in service margins can offset the well-defined pricing pressure in wholesale vehicles.
• Pay critical attention to management's commentary on future wholesale pricing trends and inventory management, as this remains the primary headwind impacting near-term profitability and valuation.
• Given the Zacks Rank #3 (Hold) and identified headwinds, consider holding existing positions rather than initiating new ones until there is more clarity on the stabilization of wholesale vehicle margins.