Cramer says ‘do not sell’ CarMax stock after its Q1 earnings

CarMax Inc (NYSE: KMX) is up 10% on Friday after reporting strong results for its first financial quarter as demand for used cars started to show signs of recovery.

CarMax Q1 financial highlights

• Earned $158.6 million versus the year ago $252.3 million
• Per-share earnings also declined from $1.56 to $1.44
• Adjusted EPS printed at $1.16 as per the press release
• Total sales climbed 17.4% year-on-year to $7.69 billion
• Consensus was $79 cents a share on $7.50 billion revenue

Retail and wholesale combined unit sales were down over 11% in the recent quarter. Still, famed investor Jim Cramer said today on CNBC’s “Squawk on the Street”:

Even though all numbers look like they’re down, the fact is they’re doing far better. When do they make most money? When used cars go down and news cars go up. That is what’s happening.

Jim Cramer shares his view on CarMax stock

Other notable figures in the earnings report include average price for used vehicles that came in down 5.5%. CarMax currently has authorisation for $2.45 billion worth of stock repurchase.  

The Richmond-headquartered company bought a total of 343,000 vehicles in the first quarter – a 5.0% year-on-year decline but a material improvement sequentially. Cramer added:

This is the first of many good quarters. It’s very important to realise, please do not sell this because it’s the first quarter where we have the manufacturer suggested retail price higher and used car lower.

Versus its year-to-date low, CarMax stock is up more than 50% at writing.