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CarMax (KMX +6%) is driving in high gear today after getting FY26 off to a good start. The nation's largest retailer of used autos reported big EPS upside with its Q1 (May) report this morning. KMX earnings have been volatile lately. It had big EPS upside in Q3, then a Q4 miss and today a huge beat. Part of the issue is KMX does not guide, so analysts are a bit in the dark.

• Revenue rose 6.1% yr/yr to $7.55 bln, which was slight upside. Combined retail and wholesale used vehicle unit sales were 379,727, an increase of 5.8% yr/yr. Total retail used vehicle unit sales increased 9.0% to 230,210. Comparable store used unit sales increased +8.1%.
• Total retail used vehicle revenue increased 7.5% yr/yr, driven by the increase in retail used units sold. Wholesale unit sales were up 1.2% yr/yr, although average wholesale selling price declined approximately $150 per unit to $8,000.
• KMX said was it pleased it delivered its fourth consecutive quarter of positive retail comps and double-digit yr/yr EPS growth. Importantly, KMX was pleased that all three months were positive. April ended up being the strongest month in Q1 with tariff concerns likely playing a role. In terms of the outlook for the rest of the year, KMX feels like it's in a good position. KMX expects to continue to grow sales and continue to gain market share.

Investors are reacting positively to KMX's Q1 results and with good reason. This was its largest EPS upside of any quarter in the past two years. Its earnings are known to be pretty volatile, partly because management does not guide and partly because gauging consumer demand for used vehicles can be difficult from quarter-to-quarter. Tariffs on foreign-made vehicles added another wrinkle, making this a difficult quarter to predict.

On a final note, sentiment was running quite low heading into this report as evidenced by the sharp pullback in the share price since early March. We think a lot of that was related to tariffs and the potential impact on the used car market. However, the impact did not seem to be too great.

We thought that the tariffs on foreign vehicles might spur demand for used cars in the US. However, offsetting that is that we have a cautious consumer worried about the macro economy and job security. All of this made for a difficult quarter to predict, but it was better than expected.