Stocks in the News: CarMax Maxed Out

Posted: Sep 26, 2013 12:01 AM

Welcome to John Ransom's Stocks In The News, where the headline meets the trendline.

Stocks in the News is produced by Ransom Notes Radio and Goodfellow, LLC. Crista Huff manages Goodfellow LLC, a website that recommends outperforming stocks using fundamental and technical analysis.

Stock number one is:

CarMax, Inc., (SYMBOL: KMX) and the headline says:

CarMax Reports Record Second Quarter Results – the Wall Street Journal

CarMax reported strong second quarter earnings, beating Wall Street’s estimates on revenue, operating income, and earnings per share.Used vehicle sales were robust, up 21%.

Earnings are projected to grow 17, 10, and 12 percent over the next three years, with possible increases after today's report.The PE is high at 23.

The stock is up 34% year-to-date.The chart is bullish, but with a PE twice as high as projected earnings growth rates, we encourage investors to be cautious and use stop-loss orders.

Our Ransom Note trendline says: HOLD CARMAX.

Stock number two is:

Carnival Corp., (SYMBOL: CCL) and the headline says:

Carnival shares drop on earnings report – South Florida Business Journal

Carnival Corp. reported third quarter earnings above consensus, but guided analysts toward a fourth-quarter loss, sending shares tumbling 12% since Monday’s close.The cruise ship operator has been plagued by a sinking ship which caused the death of 32 people, and various other publicized mechanical difficulties.Booking trends on Carnival ships have increased during the last six weeks, and the company is also optimistic about future price increases.

At least nine investment firms cut their target prices and ratings on Carnival this morning, with large downward revisions in 2014 & ’15 earnings estimates.Citi Research projects earnings to be down 18% this year, then up 10% next year.The dividend yield is 3%, and the PE is rich at 21.

While the stock will likely find support here around $32, it could fall further to $29.We see more risk of loss than gain at this point.

Our Ransom Note trendline says: SELL CARNIVAL CORP.

Stock number three is:

AutoZone, Inc., (SYMBOL: AZO ) and the headline says:

AutoZone Beats Earnings, Revenues In Line -- Zacks

AutoZone reported fourth quarter results of $10.42 per share on higher margins, helped by a lower-than-expected tax rate and higher share repurchases.Overall revenues were up 12%, with 69 new store openings, but same-store-sales increases were a disappointment at 1%.

The company repurchased $1.4 billion of shares for the year, and another $468 million remains in the repurchase authorization.

Earnings are expected to grow at 13% for each of the next two years, and the PE is 13.

The share price reached new highs this summer, had an orderly pullback to support levels, and could easily rebound to $450 this fall.

Our Ransom Note trendline says:HOLD AUTOZONE.

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