CarMax (KMX) Q4 Earnings Preview: Tuesday’s Outlook

TLDR

• CarMax will announce its Q4 FY26 earnings results prior to the market opening on Tuesday, April 14.
• Wall Street analysts project earnings per share (EPS) of $0.21—representing a 64% year-over-year decrease—and revenue of $5.69 billion, a 5.2% decline from the prior year.
• Options traders are factoring in an approximate 10.5% swing in KMX stock following the earnings release—almost twice the 5.72% average move over the past four quarters.
• KMX stock has gained 21% so far this year, supported by a settlement with activist investor Starboard and the appointment of two new independent directors.
• The average analyst price target of $37.15 suggests roughly 20% downside potential from the stock’s current levels.

(SeaPRwire) –   Ahead of Tuesday’s earnings announcement, CarMax has settled with Starboard Value and added two new independent directors to its board. Wall Street anticipates a challenging quarter, with revenue predicted to decline 5.2% year-over-year to $5.69 billion and EPS set to drop 64% to $0.21.

CarMax, Inc., KMX

Even with the cautious forecast, KMX has risen 21% year-to-date as it approaches the earnings release.

The positive sentiment mainly stems from expectations surrounding CEO Keith Barr’s turnaround strategy. This plan focuses on reducing costs, enhancing efficiency, and attracting customers through more affordable inventory and targeted marketing efforts. Starboard’s entry brought a sense of urgency, and many of the activist firm’s recommendations are said to be included in the plan.

Evercore analyst Greg Melich increased his price target for KMX from $40 to $45 while maintaining a Hold rating. He forecasts a 3.0% drop in comparable used-unit sales—slightly better than the FactSet consensus of a 3.5% decline. His EPS estimate of $0.21 is driven by stronger comparable sales, partially balanced by a more conservative assumption about gross profit per unit. Melich thinks CarMax needed to “tighten pricing to steady volume trends.”

William Blair’s Sharon Zackfia also maintains a Hold rating on KMX. She predicts a 3% revenue decrease in Q4, based on flat average retail selling prices and a high-single-digit decline in wholesale revenue. Her EPS estimate of $0.21 is influenced by below-consensus forecasts for retail gross profit per unit and CarMax Auto Finance earnings.

Zackfia considers the sequential improvement in comparable used-unit sales—from a 9% decline in Q3 FY26 to an anticipated 2% drop in Q4—as a “positive turning point.” However, she notes that uncertainties persist regarding CarMax’s ability to fully restore its historical profit margins. She believes KMX is fairly valued at 19 times her calendar year 2026 earnings estimate.

Risks Remain Heading In

Neither analyst has turned bullish on KMX yet. Both point to intense competition, cyclical challenges, and execution risks as major worries. Over the past two years, CarMax has fallen short of Wall Street’s revenue expectations on several occasions, and even though the bar is low, it hasn’t always been met.

Options traders are indicating an approximate 10.53% price swing in either direction after the earnings report. This is significantly higher than the stock’s four-quarter average post-earnings move of 5.72%, signaling that the market perceives significant uncertainty around the results.

What Investors Are Watching

Investors will be closely watching management’s remarks on the progress of the turnaround plan and the direction of consumer demand. Macroeconomic pressures and tariff uncertainties have led some consumers to choose used vehicles over new ones, which might offer a slight boost to CarMax.

The average analyst price target of $37.15 indicates a roughly 20% downside from the current price of about $46.79, implying that Wall Street believes the stock’s recent gains have outpaced its underlying fundamentals.