CarMax (NYSE:KMX) is scheduled to announce its Q1 FY’26 earnings on Friday, June 20th. Analysts predict that revenue will rise to approximately $7.56 billion for the quarter, reflecting a 6% increase year-over-year, while adjusted earnings are anticipated to be around $1.19 per share, compared to $0.97 in the same quarter last year. CarMax has experienced revenue growth, propelled by an increase in second-hand vehicle sales volume and an expansion in its financing operations. Profitability has also been improving, aided by enhanced cost management as well as digital innovations that have contributed to a better customer experience and operational efficiency. CarMax currently has a market capitalization of $10 billion. Its revenue over the past twelve months was $26 billion, and the company reported a net income of $501 million. However, if you’re looking for upside with less volatility than individual stocks, the Trefis High Quality portfolio offers an alternative, having surpassed the S&P 500 and generated returns over 91% since its launch.
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CarMax’s Historical Odds Of Positive Post-Earnings Return
A few observations regarding one-day (1D) post-earnings returns:
- There have been 20 recorded earnings data points over the last five years, with 8 positive and 12 negative one-day (1D) returns noted. In total, positive 1D returns occurred about 40% of the time.
- Interestingly, this percentage rises to 58% if we look at data from the last 3 years instead of 5.
- The median of the 8 positive returns is 5.9%, while the median of the 12 negative returns is -9.4%
Additional information on the observed 5-Day (5D) and 21-Day (21D) returns following earnings are summarized along with the statistics in the table below.
Correlation Between 1D, 5D, and 21D Historical Returns
A relatively less risky approach (although it may not be beneficial if the correlation is low) is to understand the correlation between short-term and medium-term returns following earnings, identify a pair that displays the highest correlation, and execute the appropriate trade. For instance, if 1D and 5D show the strongest correlation, a trader can place a “long” position for the following 5 days if the 1D post-earnings return is positive. Below is some correlation data based on the 5-year and 3-year (more recent) history. Note that the correlation 1D_5D indicates the correlation between 1D post-earnings returns and the subsequent 5D returns.
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