Earnings Previews: CarMax, Smith & Wesson

In the first half-hour of Wednesday’s trading, the Dow Jones industrials were down 0.42%, the S&P 500 down 0.38% and the Nasdaq down 0.30%.

After markets closed on Tuesday, FedEx reported mixed results, beating the consensus estimate for earnings per share (EPS) but missing on revenue. The company said it expects to cut expenses by $1.8 billion this fiscal year and a total of $4 billion by the end of fiscal 2025. Guidance was disappointing but not negative. Shares traded down about 0.6%.

Before U.S. markets opened on Wednesday morning, Winnebago also beat EPS estimates and missed on revenue. Sales were about 9% below the analysts’ consensus and more than 38% lower than in the year-ago quarter. The stock traded down 2.3% early Wednesday.

After markets close on Wednesday or before they open on Thursday, Accenture, Darden Restaurants and KB Home will report quarterly results.

Here is a look at what to expect from two companies reporting earnings late Thursday or early Friday.

CarMax

Shares of used car retailer CarMax Inc. (NYSE: KMX) have jumped more than 36% so far in 2023, pushing the stock’s 12-month return to just over 27%. Car Max reports results first thing Friday morning.

The used car dealership sells, services and finances purchases at some 220 stores around the United States. Used car sales are fighting battles with low inventory, high interest rates and high retail prices, all of which are weighing on demand. According to Cox Automotive, U.S. used car sales have dropped from a seasonally adjusted annual rate of sales estimated at 37.8 million units last May to 36.5 million in May of this year. Cox’s analysts expect total used car sales to reach 36.2 million in 2023, basically flat with 2022.

Of 20 analysts covering the stock, eight have a Buy or Strong Buy rating and another nine have Hold ratings. At a recent price of around $78.60 per share, the stock is well past its median price target of $73.00. At the high price target of $141.00, the upside potential is 79.4%.

Fiscal first-quarter revenue is forecast at $7.52 billion, which would be up 31.3% sequentially but down 19.2% year over year. Adjusted EPS are expected to come in at $0.81, up 83.9% sequentially and 48.1% lower year over year. For the full 2024 fiscal year ending in February, CarMax is expected to report EPS of $2.36, down 22.1%, on sales of $27.16 billion, down 8.5%.

CarMax stock trades at 33.3 times expected 2024 EPS, 23.5 times estimated 2025 earnings of $3.35 and 18.3 times estimated 2026 earnings of $4.29 per share. CarMax’s 52-week trading range is $52.10 to $106.24. CarMax does not pay a dividend, and total shareholder return over the past 12 months is negative 9.66%.

Smith & Wesson

Shares of gun maker Smith & Wesson Brands Inc. (NASDAQ: SWBI) have added more than 34% over the past 12 months, including a gain of nearly 40% in 2023. The company reports earnings after Thursday’s closing bell.

The company is the largest (by revenue) gunmaker in the world and has a market cap of around $534 million. It beat sales and EPS estimates in the prior quarter and is expected to do so again for its April quarter. New gun sales were sliding at the beginning of the year, but legislation championed by President Biden to curtail gun violence and a federal court ruling lifting the restriction on gun sales to people under 21 years old gave the industry a fresh boost.

Only three analysts cover the stock, two with Buy ratings and the other at Hold. At a price of around $11.60 per share, the implied upside based on a median estimate of $13.50 is 16.4%. At the high target price of $20.00, the upside potential is 72.4%.

Fourth-quarter revenue is forecast at $138.38 million, up 70.2% sequentially but 23.7% lower year over year. Adjusted EPS are tabbed at $0.29, up 16% sequentially and down by 64.6% year over year. For the full 2023 fiscal year that ended in April, Smith & Wesson is expected to post EPS of $0.91, down 78.6%, on sales of $472.9 million, down by 45.3%.

The stock trades at 12.8 times expected 2023 EPS and 12.7 times estimated 2024 earnings of $0.92 per share. Its 52-week range is $8.21 to $16.72. The company pays an annual dividend of $0.40 (yield of 3.35%). Total shareholder return for the past year was negative 9.89%.

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