Service Stock Tanking On Earnings & Guidance (KMX) (WERN)

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CarMax, Inc (NYSE: KMX) | Werner Enterprises, Inc. (NASDAQ: WERN)

Today is proving to be a rough day for two big service stocks. Both of these companies recently reported earnings, and both of them seemed to have missed the mark. Today, we’ll take a look at earnings and talk about what we can expect to see from KMX and WERN moving forward. So, let’s get right to it…

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KMX Misses Earnings

First and foremost, we have CarMax. Early this morning, the company reported earnings, missing expectations and upsetting investors. Here’s what we saw:

  • Earnings Per Share – In terms of earnings per share, KMX missed the mark. During the quarter, analysts expected that the company would generate earnings in the amount of $0.92 per share. However, the company actually produced earnings in the amount of $0.90 per share.
  • Revenue – While revenue saw a year-over-year increase, it still missed expectations. During the quarter, analysts expected that the company would generate revenue in the amount of $4.19 billion. However, KMX only generated revenue in the amount of $4.13 billion. This represents year-over-year growth in the amount of 2.8%.

According to the company, the rising comparable sales were the result of a combination of improvement in conversion that offset a decrease in store traffic. With that considered, investors are concerned that fewer people are buying cars at the moment, which will hurt CarMax in the long run.

The poor report has ultimately sent KMX diving downward in the market. Currently (10:15), the stock is trading at $48.47 per share after a loss of $2.16 per share, or 4.27%, thus far today.

Moving forward, I have a relatively mixed opinion of what we can expect to see from KMX. The reality is that, in the short run, poor economic conditions are likely to lead to reductions in car sales. So, I’m expecting further short-run losses. However, as the economy improves as a whole, CarMax is likely to see improved sales and long-run gains.

WERN Concerns With Poor Guidance

While Werner Enterprises has not yet released its earnings for the second quarter, the company has released guidance, which is proving to be overwhelmingly concerning. Here’s the data that was released:

  • Earnings Guidance – During the second quarter, analysts are expecting that WERN will generate earnings in the amount of $0.40 per share. However, the company released expectations that were about half that. During the second quarter, the company is expecting to report earnings in the range between $0.21 and $0.25 per share.
  • Revenue – In terms of revenue, WERN is expecting to generate a total pre-tax gain on the sale of real estate in the amount of $3.4 million. No other data was offered.

Werner Enterprises said that there were 3 factors that are likely going to drive the poor second quarter performance. Those factors include:

  1. Sluggish freight market conditions. These sluggish conditions are expected to result in decelerating rates per mile.
  2. Driver pay increases have been implemented, increasing costs.
  3. Used truck market is weighing heavy on the company’s ability to sell its used trucks for a decent price.

As a result of the poor guidance, we are seeing declines in the value of WERN stock. Currently (10:32), the stock is trading at $22.71 per share after a loss of $1.97 per share, or 7.98%, so far today.

Moving forward, WERN is another stock on which I have a relatively mixed opinion. The truth is that poor economic conditions are weighing on this company as well. As economic concern grows, we’re likely to see further declines. However, when we start to see economic growth again, we will likely see strong growth in WERN as a result.

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What Do You Think?

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Hey, Im Joshua, the founder of CNA Finance. I enjoy following the trends in the market and finding the catalysts that are making the moves. If you want to get in contact with me, leave a comment below or email me at CNAFinanceHelp@gmail.com Please keep in mind that I am not an investment advisor and nor is CNA Finance. This is a news and information gathering outlet. We may work directly with some of the companies that we write about. If we have a business relationship with an issuer, we will mention that in the articles. We also have various affiliate relationships with advertisers and may be paid if you sign up for a service that you were referred to through our website.

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