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CarMax likely to get green signal in Q2 on Sept 24

CarMax (NYSE: KMX) is scheduled to report its second-quarter earnings results on Tuesday before the market opens. The top line will be benefited by aggressive store-expansion initiatives, web traffic growth, lending environment, and conversion. The used-car retailer’s leverage of costs and expenses will be reflected in the bottom-line growth.

The company achieves revenue from the sale of used vehicles at retail stores, wholesale vehicles at auctions, extended protection plan and guaranteed asset protection products, as well as from Auto Finance. As of May 31, 2019, CarMax operated 206 used car stores in 102 US television markets, 2 new car franchises, and conducted wholesale auctions at 76 used car stores.

The opening of stores, variable costs related to sales, and share-based compensation expense could drive the selling, general and administrative expenses higher. This will also include continued investments in technology platforms and digital initiatives.

What to expect from CarMax Q2 earnings
Courtesy: CarMax / Facebook post

The company remained at a significant competitive advantage due to the powerful integration of its in-store and online capabilities. In the near term, CarMax anticipates certain inefficiencies in some of its operations as it continues to enhance its omnichannel capabilities.

Analysts expect the company’s earnings to increase by 7.30% to $1.33 per share and revenue will rise by 6.20% to $5.06 billion for the second quarter. The company has surprised investors by beating analysts’ expectations in all of the past four quarters. Majority of the analysts recommended a “hold” rating with an average price target of $97.75.

Read: Nio Q2 earnings preview

For the first quarter, CarMax posted a 12% increase in earnings backed by strong conversion, solid growth in web traffic, and store base growth. Used unit sales in comparable stores increased 9.5% and total used unit sales grew 13%. Total wholesale unit sales rose by 6.6%, largely driven by an increase in appraisal buy rate and the growth in its store base.

During the first quarter of fiscal 2020, CarMax opened three stores, two in new markets at Waco, Texas and McAllen, Texas and one in an existing market at Memphis, Tennessee. The company plans to open 10 stores in the balance of fiscal 2020 and 13 stores in fiscal 2021 with four store opening happening in Q1 2021.

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Will renewable energy power the future?

Alphabet’s (NYSE: GOOGL) subsidiary Google just increased its commitment to renewable energy. The company has purchased a 1,600MW package of agreements that includes 18 new energy deals, which will increase its global portfolio of wind and solar agreements by over 40% to 5,500MW.  

In 2017 and 2018, the company managed to match its entire annual electricity consumption with renewable energy, thus becoming the largest corporate buyer of renewable energy in the world.  

First Solar Q2 2019 Earnings
Photo by Zbynek Burival on Unsplash

The company’s new agreements will drive the construction of energy infrastructure worth over $2 billion, including solar panels and wind turbines. The 18 deals include investments in the US, Europe and Chile. The deal in Chile includes a hybrid technology deal that combines solar and wind.

Google is not the only major corporation that is increasing its investment in renewable energy. A number of companies, including Budweiser, Gap Inc. (NYSE: GPS) and MGM Resorts International (NYSE: MGM), have invested in solar and wind energy, increasing their spend by 13% to more than $16 billion last year. This growth is expected to double in 2019.

The US Energy Information Administration forecasts that energy resources such as solar and wind will be the fastest-growing source of electricity generation in the US over the next two years. The EIA estimates electricity generation from utility-scale solar generating units to increase by 10% in 2019 and by 17% in 2020. Wind generation is expected to grow by 12% in 2019 and 14% in 2020.

Also read: JinkoSolar Q2 2019 Earnings Report

The report by EIA states that the industry plans to bring around 11GW of wind capacity online in 2019 and another 8GW in 2020. Solar capacity is expected to increase by over 4GW in 2019 and almost 6GW in 2020.

A report by Deloitte suggests that taxes and trade policies could create headwinds for the growth of the renewable energy sector in 2019. Despite this, new initiatives at the state and federal level could drive renewable energy growth. The increasing investments in renewable energy by corporates as well as advancement in technologies are also factors that could help push growth.

All in all, it does appear that we are slowly moving towards a future where renewable energy sources will play an important role.

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