How Will CarMax Stock React To Its Upcoming Earnings?


Useed car retailer CarMax (NYSE:KMX) is set to report its earnings on Thursday, April 10, 2025. Consensus estimates for the quarter indicate expected earnings of $0.66 per share on sales of $5.97 billion. This represents a significant rise from the prior-year quarter, when the company reported earnings of $0.32 per share on sales of $5.63 billion.

KMX stock has seen a 10% drop this year. While this decline is primarily attributed to the broader market downturn, these market concerns appear to be amplified by wider economic anxieties. Specifically, President Donald Trump’s recent announcement of sweeping tariffs on goods from over 100 countries has heightened worries about the potential negative impact on the U.S. economy and consumer spending. Consequently, the combination of softening demand and broader economic uncertainty presents a challenging outlook for the auto industry.

Image by TRANG NGUYEN from Pixabay

CarMax has $11 Bil in current market capitalization. Revenue over the last twelve months was $26 Bil, and it was operationally loss-making with $-270 Mil in operating losses and net income of $461 Mil. While a lot will depend on how results stack up against consensus and expectations, understanding historical patterns might just turn the odds in your favor if you are an event-driven trader. There are two ways to do that: understand the historical odds and position yourself prior to the earnings release, or look at the correlation between immediate and medium-term returns post earnings and position yourself accordingly after the earnings are released. That said, if you seek upside with lower volatility than individual stocks, the Trefis High-Quality portfolio presents an alternative – having outperformed the S&P 500 and generated returns exceeding 75% since its inception.

Relevant Articles
  1. How Will Chevron Stock React To Its Upcoming Q1 Earnings?
  2. Sell SMCI Stock After Earnings Miss?
  3. How To Trade Hims & Hers Health Stock Ahead of Its Earnings?
  4. How Will Vertex Pharmaceuticals Stock React To Its Upcoming Earnings?
  5. What’s Next For Microsoft Stock After An Upbeat Fiscal Q3?
  6. What’s Next For META Stock After An Upbeat Q1?

See earnings reaction history of all stocks

CarMax’s Historical Odds Of Positive Post-Earnings Return

Some observations on one-day (1D) post-earnings returns:

  • There are 19 earnings data points recorded over the last five years, with 8 positive and 11 negative one-day (1D) returns observed. In summary, positive 1D returns were seen about 42% of the time.
  • Notably, this percentage increases to 58% if we consider data for the last 3 years instead of 5.
  • Median of the 8 positive returns = 5.9%, and median of the 11 negative returns = -9.2%

Additional data for observed 5-Day (5D), and 21-Day (21D) returns post earnings are summarized along with the statistics in the table below.

KMX observed 1D, 5D, and 21D returns post earnings

 

Correlation Between 1D, 5D, and 21D Historical Returns

A relatively less risky strategy (though not useful if the correlation is low) is to understand the correlation between short-term and medium-term returns post earnings, find a pair that has the highest correlation, and execute the appropriate trade. For example, if 1D and 5D show the highest correlation, a trader can position themselves “long” for the next 5 days if 1D post-earnings return is positive. Here is some correlation data based on 5-year and 3-year (more recent) history. Note that the correlation 1D_5D refers to the correlation between 1D post-earnings returns and subsequent 5D returns.

KMX Correlation Between 1D, 5D and 21D Historical Returns

Systematic Strategies & Rules-Based Wealth Management

Trefis runs systematic portfolio strategies that incorporate risk control through a combination of high-quality picks and active hedges. We’ve partnered with Empirical Asset Management, a rules-based wealth manager, to make these strategies available to investors. If you’re interested in learning more about Trefis strategies or Empirical check out this link.