CarMax Inc (KMX.N), the largest used-car retailer in the United States, reported strong quarterly results as a better supply and an improving consumer sentiment helped it sell more vehicles at higher prices.
Shares of CarMax, which also sells some new cars, rose as much as 8 percent to $48.01 in early morning trading, making it one of the top percentage gainers on the New York Stock Exchange.
In the three months ended May, the company sold 137,154 used vehicles, an increase of 22 percent compared to a year earlier. Average selling price rose 1.3 percent to $19,540.
The supply of used cars has improved after a shortage over the previous few quarters as customers ditch their cars in favor of newer models.
"The strength (in results) is impressive given that the sweet spot of returning supply is still a year away," Credit Suisse analysts wrote in a note titled 'A quick shift to high gear'.
First-quarter revenue rose 19 percent to $3.31 billion, above the $3.15 billion analysts had estimated.
CarMax benefited as delayed tax refunds pushed some sales from February into March.
Sales in CarMax's wholesale business also rose 5 percent. The business sells cars that don't meet its retail standards to licensed dealers.
Net income rose to $146.7 million, or 64 cents per share, in the first quarter from $120.7 million, or 52 cents per share, a year earlier.
Analysts on average expected earnings of 58 cents per share, according to Thomson Reuters I/B/E/S.
CarMax, which has over a 100 lots in the United States, has stepped up its store growth to take advantage of an improving U.S. economy.
It has already opened four stores in its current fiscal year and plans to launch 13 more by May 2014.
CarMax shares were up 1.2 pct at $45.17 on the New York Stock Exchange.
(Additional reporting by Sagarika Jaisinghani in Bangalore; Editing by Sreejiraj Eluvangal)