On April 14, 2026, RBC Capital Markets analyst Steven Shemesh published a review of Carmax Inc. (KMX:NYSE), following the company's fiscal fourth-quarter 2026 earnings.
Shemesh maintained a Sector Perform rating and raised his 12-month price target to US$41 from US$37, based on approximately 15x his FY2028 adjusted EPS estimate of US$2.73. With the stock priced at US$41.66, the price target implies a modest downside of approximately 2%.
While the analyst described Q4 results as "largely in line" with his model and expressed encouragement at top-line progress, he remained cautious on the sustainability of recent industry momentum in the face of rising gas prices and eroding consumer confidence.
Recent Significant Developments
CarMax management raised its SG&A cost-reduction commitment from US$150M to US$200M as an exit-rate target by the end of FY2027, citing additional efficiencies identified within the business. The company is exiting FY2026, having already achieved US$100M in savings.
However, Shemesh noted that year-over-year SG&A savings within FY2027 are expected to be offset as the business annualizes over reduced corporate bonuses and stock-based compensation, inflationary pressures, and new store growth. Management also announced the pausing of share repurchases to focus on improving the business, despite a remaining buyback authorization of US$1.31B. In Q4, CarMax repurchased 1.3M shares for US$50M.
On the strategic front, KMX plans to open four new stores in FY2027, along with two new off-site reconditioning and auction locations and two additional off-site auction locations. Capital expenditure is expected to be approximately US$400M in FY2027, with the majority directed toward land acquisition and facility build-outs for long-term growth capacity in reconditioning and auctions. Management also announced a plan to transition its SG&A efficiency metric to a per-total-unit ratio encompassing both retail and wholesale units.
Financial Results & Key Metrics
Q4 FY2026 total company revenue came in at US$5.946B, ahead of RBC's prior estimate of US$5.741B. Used vehicle retail comp units declined 1.9% year-over-year, meaningfully better than the consensus estimate of -4.0% and a notable acceleration from Q2's -6.3% and Q3's -9.0%. Management attributed the improvement to a combination of lower gross profit per unit (GPU), increased acquisition marketing spend, and enhancements to KMX's online selling capabilities.
Retail GPUs declined 8.9% year-over-year to US$2,115 in Q4 (versus US$2,321 in the prior-year period), reflecting management's deliberate strategy to become more price competitive. For FY2027, management guided for retail GPU declines broadly in line with Q4's pace, with Q1 FY2027 expected to see the largest year-over-year decline of approximately US$300 per unit, implying roughly a 13% decline.
CarMax Auto Finance (CAF) income declined 9.8% year-over-year to US$143.7M, falling slightly short of the consensus estimate of US$148M. The decrease was primarily attributed to a reduced held-for-investment receivable base following the US$900M 2025-B non-prime securitization transaction executed in the prior quarter, as well as lower origination dollars in recent years. Credit losses were in line with expectations. KMX gained approximately US$5M in servicing fees related to the closing of the 2025-B deal, with fees expected to continue proportionally over the remaining life of the transaction. Management also guided for material CAF penetration growth over the next several quarters toward approximately 50%, driven by focus on tier 2 lending supported by a flexible funding strategy and new underwriting models.
On a reported GAAP basis, EPS this quarter was impacted by a non-cash goodwill impairment charge of US$0.99 per share — driven by a decline in market capitalization coinciding with a prescriptive impairment measurement period and pressured finance performance — and restructuring charges of US$0.20 per share related to corporate workforce reductions and the early abandonment of underutilized space associated with the Edmunds office.
Analyst Outlook & Estimate Changes
For Q1 FY2027, Shemesh slightly raised his retail comp units estimate to -2% (from -3% prior) and his total company net sales estimate to -3% (from -4.9% prior), while trimming his adjusted EPS estimate to US$1.01 from US$1.16, reflecting more conservative GPU and CAF assumptions. For the full FY2027, he now models retail comp units of +1.0% (versus -1.7% prior), with total company net sales revised to -0.6% and adjusted EPS of US$2.35 (versus US$2.43 prior). The analyst introduced FY2028 estimates calling for total company net sales growth of +4.3% and adjusted EPS of US$2.73.
Shemesh noted a positive near-term data point, with management indicating that the broader industry had looked healthy coming out of March, supported by a strong tax season. However, he flagged caution around the durability of this trend given the macroeconomic backdrop.
Valuation
The US$41 price target is based on a ~15x P/E multiple applied to the FY2028 adjusted EPS estimate of US$2.73, which assumes a 2026-to-2028 net revenue growth CAGR of 1.8%, operating margins of 2.1%-2.2%, and a 4% reduction in share count from buybacks. The 15x target multiple is slightly below the company's five-year median. The upside scenario of US$59 applies a 17x multiple to an upside FY2028 EPS estimate of US$3.49, based on a revenue CAGR of 5.4% and higher operating margins, reflecting a faster-than-expected recovery in consumer demand for used cars.
The downside scenario of US$29 applies a 14x multiple to a downside FY2028 EPS estimate of US$2.06, based on a revenue CAGR of -1.0% and compressed margins, reflecting a scenario in which consumer demand recovers more slowly than anticipated, pressuring average selling prices.
Risks & Challenges
Key risks to the rating and price target include further deterioration in consumer spending trends, increased competition within the used-vehicle retailing industry, failure of the company's omni-channel rollout to gain traction in certain markets, further constraints on used vehicle supply, and any tightening in auto lending standards that could pressure unit sales growth.
Investment Summary
Despite a difficult near-term macro setup, Shemesh views CarMax as well-positioned to continue gaining share in the highly fragmented used car market over the long term. With approximately 40 million used cars changing hands annually, KMX holds roughly 4% of the overall market, up from 3.5% in 2020.
The company's established omni-channel capabilities, focus on older vehicles, and strong cash flow generation underpin his constructive long-term view. With the stock trading at US$41.66 and a price target of US$41, the implied return is approximately -2%, consistent with a Sector Perform rating.
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Disclosures for RBC Capital Markets, Carmax Inc., April 14, 2026
Conflicts disclosures The analyst(s) responsible for preparing this research report received compensation that is based upon various factors, including total revenues of the member companies of RBC Capital Markets and its affiliates, a portion of which are or have been generated by investment banking activities of the member companies of RBC Capital Markets and its affiliates. With regard to the MAR investment recommendation requirements in relation to relevant securities, a member company of Royal Bank of Canada, together with its affiliates, may have a net long or short financial interest in excess of 0.5% of the total issued share capital of the entities mentioned in the investment recommendation. Information relating to this is available upon request from your RBC investment advisor or institutional salesperson. Please note that current conflicts disclosures may differ from those as of the publication date on, and as set forth in, this report. To access current conflicts disclosures, clients should refer to https://www.rbccm.com/GLDisclosure/PublicWeb/ DisclosureLookup.aspx?entityId=1 or send a request to RBC CM Research Publishing, P.O. Box 50, 200 Bay Street, Royal Bank Plaza, 29th Floor, South Tower, Toronto, Ontario M5J 2W7. A member company of RBC Capital Markets or one of its affiliates expects to receive or intends to seek compensation for investment banking services from CarMax, Inc. in the next three months. A member company of RBC Capital Markets or one of its affiliates received compensation for investment banking services from CarMax, Inc. in the past 12 months. RBC Capital Markets has provided CarMax, Inc. with non-securities services in the past 12 months. RBC Capital Markets, LLC makes a market in the securities of CarMax, Inc.. A member company of RBC Capital Markets or one of its affiliates received compensation for products or services other than investment banking services from CarMax, Inc. during the past 12 months. During this time, a member company of RBC Capital Markets or one of its affiliates provided non-securities services to CarMax, Inc.. A member company of RBC Capital Markets or one of its affiliates managed or co-managed a public offering of securities for CarMax, Inc. in the past 12 months. Explanation of RBC Capital Markets Equity rating system An analyst's 'sector' is the universe of companies for which the analyst provides research coverage. Accordingly, the rating assigned to a particular stock represents solely the analyst's view of how that stock will perform over the next 12 months relative to the analyst's sector average. Ratings Outperform (O): Expected to materially outperform sector average over 12 months. Sector Perform (SP): Returns expected to be in line with sector average over 12 months. Underperform (U): Returns expected to be materially below sector average over 12 months. Restricted (R): RBC policy precludes certain types of communications, including an investment recommendation, when RBC is acting as an advisor in certain merger or other strategic transactions and in certain other circumstances. Not Rated (NR): The rating, price targets and estimates have been removed due to applicable legal, regulatory or policy constraints which may include when RBC Capital Markets is acting in an advisory capacity involving the company. Risk Rating
The Speculative risk rating reflects a security's lower level of financial or operating predictability, illiquid share trading volumes, high balance sheet leverage, or limited operating history that result in a higher expectation of financial and/or stock price volatility. Distribution of ratings For the purpose of ratings distributions, regulatory rules require member firms to assign ratings to one of three rating categories - Buy, Hold/Neutral, or Sell - regardless of a firm's own rating categories. Although RBC Capital Markets' ratings of Outperform (O), Sector Perform (SP), and Underperform (U) most closely correspond to Buy, Hold/Neutral and Sell, respectively, the meanings are not the same because our ratings are determined on a relative basis. Distribution of ratings RBC Capital Markets, Equity Research As of 31-Mar-2026 Investment Banking Serv./Past 12 Mos. Rating Count Percent Count Percent BUY [Outperform] 899 57.52 286 31.81 HOLD [Sector Perform] 612 39.16 153 25.00 SELL [Underperform] 52 3.33 5 9.62 Rating and price target history for: CarMax, Inc., KMX US as of 13-Apr-2026 (in USD) 100 90 80 70 60 50 40 30 Q1 Q2 Q3 2024 Q1 Q2 Q3 2025 Q1 Q2 Q3 2026 Q1 Q2 12-Apr-2023 Rtg:O Target: 70.00 26-Jun-2023 Rtg:O Target: 90.00 29-Sep-2023 Rtg:O Target: 80.00 22-Dec-2023 Rtg:O Target: 83.00 12-Apr-2024 Rtg:O Target: 73.00 21-Jun-2024 Rtg:O Target: 75.00 27-Sep-2024 Rtg:O Target: 82.00 09-Dec-2024 Rtg:O Target: 99.00 20-Dec-2024 Rtg:O Target: 103.00 11-Apr-2025 Rtg:O Target: 80.00 20-Jun-2025 Rtg:O Target: 81.00 25-Sep-2025 Rtg:O Target: 59.00 07-Nov-2025 Rtg:SP Target: 34.00 18-Dec-2025 Rtg:SP Target: 37.00 Legend: O: Outperform; SP: Sector Perform; U: Underperform; R: Restricted; I: Initiation of Research Coverage; D: Discontinuation of Research Coverage; NR: Not Rated; NA: Not Available; RL: Recommended List - RL: On: Refers to date a security was placed on a recommended list, while RL Off: Refers to date a security was removed from a recommended list; Rtg: Rating. Created by: BlueMatrix References to a Recommended List in the recommendation history chart may include one or more recommended lists or model portfolios maintained by RBC Wealth Management or one of its affiliates. RBC Wealth Management recommended lists include the Guided Portfolio: Prime Income (RL 6), the Guided Portfolio: Dividend Growth (RL 8), the Guided Portfolio: ADR (RL 10), and the Guided Portfolio: All Cap Growth (RL 12). The abbreviation 'RL On' means the date a security was placed on a Recommended List. The abbreviation 'RL Off' means the date a security was removed from a Recommended List. As of April 3, 2023, U.S. RBC Wealth Management's quarterly reports will serve as the primary communication for its models and will highlight any changes to the model made during the quarter. Equity valuation and risks For valuation methods used to determine, and risks that may impede achievement of, price targets for covered companies, please see the most recent company-specific research report at www.rbcinsightresearch.com or send a request to RBC Capital Markets Research Publishing, P.O. Box 50, 200 Bay Street, Royal Bank Plaza, 29th Floor, South Tower, Toronto, Ontario M5J 2W7.
CarMax, Inc. Valuation Our price target of $41 is based on applying a ~15x P/E multiple to our FY’28 EPS estimate of $2.73. Our FY’28 EPS estimate is based on a 2026E/2028E net revenue growth CAGR of 1.8%, 2.1%/2.2% operating margin, and a 4% reduction in share count as a result of buybacks. Our 15x target multiple is slightly below the company’s 5-year median. Our price target and implied return support our Sector Perform rating. Risks to rating and price target We believe our price target and rating could be at risk if overall consumer spending trends decline further or competition within the used-vehicle retailing industry increases. We also believe our price target and rating could be at risk if the company’s omnichannel rollout fails to gain traction in certain markets, used vehicle supplies become further constrained, or additional Covid-19 variants are worse than expected. Additionally, any tightening in auto lending standards could pressure growth in unit sales. 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