CarMax recently reported quarterly earnings of $1.38 per share, which is better than the expected $1.18 per share and an improvement from last year’s $0.97 per share. This figure accounts for non-recurring items. The earnings surprise of 16.95% is significant. In the previous quarter, CarMax met the $0.64 per share expectation, showing consistency in performance. Over the last four quarters, CarMax has exceeded consensus EPS estimates twice. For the quarter ending May 2025, CarMax’s revenues were $7.55 billion, slightly above predictions by 0.40%. This is an increase from $7.11 billion reported a year ago. CarMax has surpassed revenue estimates in each of the last four quarters. However, since the start of this year, CarMax’s shares have dropped by 21.3%, while the S&P 500 has gained 1.7%. Currently, CarMax’s stock holds a Zacks Rank #3 (Hold), suggesting that it will perform in line with the market in the near future. Domino’s Pizza, another company in the retail-wholesale sector, expects quarterly earnings of $3.94 per share, a 2.2% decrease from last year. However, they forecast revenues to rise by 3.9% to $1.14 billion. CarMax’s adjusted earnings of $1.38 per share, surpassing the expected $1.18, indicates strong performance and a trend of consistent results. Removing non-recurring costs reveals a sustainable model that is doing better operationally than many expected. Comparing this to last year’s $0.97 per share shows a positive trajectory. The nearly 17% earnings surprise adds to this sentiment. While short-term earnings can sometimes result from aggressive cost-cutting, CarMax’s results are supported by revenues of $7.55 billion, which also exceeded estimates—not by much, just 0.40%—but significant in a retail sector facing margin pressures. The growth from $7.11 billion last year indicates stability. Importantly, this is not a one-time event; CarMax has beaten revenue targets for four consecutive quarters. In terms of earnings, they have two beats, one match, and one miss in the last four. This creates a pattern of meeting or slightly exceeding expectations rather than shocking outperformance. For traders, this predictability presents opportunities, especially in options trading that benefits from reduced implied volatility. Despite these positive indicators, the stock price tells a different story. CarMax shares have fallen over 21% this year, while the S&P 500 has risen 1.7%. This divergence suggests that the market may be reacting to broader sector challenges or lingering concerns about weak used car demand, tighter consumer credit, or declining valuations in related retail sectors. The Zacks Rank #3 reflects a “neutral” status, indicating no significant outperform or underperform expectations. While this may not trigger aggressive trading, it suggests limited volatility and stable short-term expectations. In contrast, Domino’s Pizza is projecting earnings of $3.94 per share, a slight decline year-over-year, but with revenues expected to rise nearly 4% to $1.14 billion. This mixed outlook—declining per-share earnings with increasing revenue—hints at pressure on profit margins or a potential shift in pricing strategy due to rising costs or changes in promotions. For those focused on derivative markets, monitoring where estimates diverge from actual results is essential. When the broader sector struggles but specific companies perform well, the options market may quickly adjust. Anticipate greater earnings premiums in upcoming months, but potential for follow-through may be limited unless there’s a significant change in the situation. CarMax’s ability to exceed expectations while seeing a stock decline is notable, especially compared to Domino’s, which is experiencing reduced profits but growing sales. Looking ahead, it might be more effective to use spread strategies rather than outright risk-on positions. This isn’t the best time for indiscriminate premium buying. Instead, consider low-delta structures, such as short straddles or out-of-the-money call spreads around earnings, for better risk control. We are observing implied volatility tightening around earnings for companies that consistently meet estimates, while remaining high where future guidance diverges. Pay close attention to how pricing changes in the hours after the earnings release, as there can often be a secondary adjustment that reveals more about future trading positions than the initial shift.

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