CarMax (KMX) Gains Momentum Ahead of Earnings, Has The Stock Reversed Trend?

CarMax's stock (NYSE:KMX) is attempting a recovery after a challenging year, down 49.43% since the year, although 22.8% higher over the past month of trading . Sentiment appears to be growing cautiously optimistic ahead of the company’s earnings release scheduled for before the market opens Thursday morning.

Wall St. is expecting the company to deliver an EPS of $0.32 for the current quarter, a significant year-over-year decrease of on the $0.81 per share delivered in the same period. Revenue expectations are also muted, with analysts anticipating a 9.49% decline compared to the same period last year at $5.63 billion.

CarMax has been grappling with a series of challenges that have weighed on its stock price. The most prominent is the recent abrupt termination of CEO Bill Nash, effective December 1. This leadership change, with David McCreight stepping in as Interim President and CEO, has introduced uncertainty regarding the company's strategic direction. Tom Folliard, the current Chair of the Board, has assumed the role of Interim Executive Chair.

Adding to the pressure, CarMax is currently embroiled in multiple securities fraud lawsuits. These lawsuits allege that the company misled investors about the strength of its business model and growth prospects. The core accusation revolves around the claim that CarMax failed to disclose that its Q1 2026 financial results were artificially inflated by consumers accelerating purchases in anticipation of tariff increases.

Concerns have also been raised about the quality of CarMax Auto Finance's loan portfolio. The company reported a significant increase in its loan loss provision in Q2 2026, further fueling investor anxiety. This has prompted closer scrutiny of the company's lending practices and the overall health of its finance arm.

The backdrop to these challenges is a broader slowdown in CarMax's core business. In its second-quarter fiscal year 2026 results, the company reported a 5.4% decrease in retail used unit sales and a 6.3% decline in comparable store used unit sales. Net earnings per diluted share also fell, decreasing to $0.64 from $0.85 year-over-year.

In response to these pressures, CarMax has initiated cost-cutting measures, announcing plans for SG&A reductions of at least $150 million over the next 18 months. The company has also launched a new brand positioning campaign titled “Wanna Drive?” in an effort to revitalize its image and attract customers.

Despite these headwinds, CarMax has been actively pursuing strategic initiatives to expand its market reach and enhance customer experience. The company recently opened its first store in Arkansas, extending its presence to 42 states nationwide. CarMax has also introduced a nationwide at-home pickup service for customers looking to sell their vehicles, offering added convenience. Furthermore, they unveiled “Offer Watch,” a tool designed to provide car owners with monthly updates on their vehicle's value.

Given the current environment of uncertainty and the mixed signals from recent developments, CarMax's stock price could experience significant volatility in the coming days. The implied volatility for KMX is elevated at 67.93%, indicating a high degree of uncertainty surrounding the stock's future direction. The expected move over the next 14 days is approximately 10.95%, suggesting volatility is on the cards one way or another.