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

CarMax (KMX) is scheduled to release its Q2 fiscal 2026 results on September 25, with consensus estimates forecasting EPS of $1.03 and revenues of $7.05 billion, reflecting year-over-year growth of 21.2% and 0.6%, respectively. While improved service gross margins are expected to positively impact performance, declining wholesale vehicle prices, influenced by the rising average age of U.S. light vehicles, are anticipated to pressure overall margins. Zacks' model, noting a negative Earnings ESP of -6.67% and a 'Hold' rank, does not conclusively predict an earnings beat for the company.

Analysis

CarMax is approaching its Q2 fiscal 2026 earnings announcement on September 25 with a bifurcated outlook. Consensus estimates project significant bottom-line improvement, with an expected EPS of $1.03 representing 21.2% year-over-year growth, although revenue is forecasted to see only marginal growth of 0.6% to $7.05 billion. A key tailwind is the company's service business, which saw its gross margin improve by $30 million in the prior quarter due to cost recovery measures and efficiency gains, a trend expected to bolster Q2 results. Conversely, this strength is likely to be offset by persistent headwinds in the wholesale vehicle segment. The rising average age of U.S. light vehicles, now at 12.8 years, is softening wholesale prices. This 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 pressure is anticipated to have impacted the second quarter. Underscoring this cautious sentiment, the Zacks model does not predict an earnings beat, citing a negative Earnings ESP of -6.67% and a #3 (Hold) rank, suggesting the most accurate earnings estimate is below the current consensus.

Key Decisions for Investors

• Adopt a cautious stance ahead of the earnings release, as the projected 21.2% YoY EPS growth is directly challenged by evidence of margin compression in the wholesale segment and a negative Earnings ESP.
• Investors should scrutinize the gross profit per wholesale unit metric, as a further decline from the Q1 figure of $1,047 could overshadow strength in the service business and trigger a negative market reaction.
• Given the conflicting fundamental drivers and the Zacks model's prediction against a beat, it may be prudent to hold existing positions rather than increase exposure until the report provides clarity on the trajectory of vehicle margins.