Ahead of the Bell: Credit Suisse upgrades CarMax

DETROIT -- Shares of used-car dealership chain Carmax Inc. could get a boost Friday from a Credit Suisse analyst's upgrade.

Analyst Gary Balter upgraded the stock to "Outperform," from "Neutral," telling investors in a note that it's a well-run company with an inexpensive share price that's on the cusp of rising earnings.

The Richmond, Va., company's investments in new dealers should peak in early- or mid-2013, and the supply of late-model used vehicles should improve, Balter wrote. These factors are likely to help the company deliver accelerated earnings gains, making it "one of the best multi-year growth stories in our view," he wrote.

CarMax's store base is rising from 110 to more than 300, one of the largest expansions in the retail business, Balter wrote.

He hiked his one-year price target on the stock to $42 from $32, and he increased his 2014 earnings estimate by 5 cents to $2.05 per share and his 2015 estimate by a dime to $2.30.

With new vehicle sales on the rise in the U.S., that should increase the used car supply, which will help CarMax, Balter wrote. Through September, new-car sales ran at an annual rate of 14.3 million, and many analysts expect fourth-quarter gains to drive that number up to 14.5 million by the end of the year.

"We believe that the KMX story may be shaping up to be one of the next breakout retail growth stories," Balter wrote, using the company's New York Stock Exchange ticker symbol.

CarMax shares closed Thursday at $32.78, up about 7.5 percent for the year. They have traded in a range of $24.83 to $35.17 in the past 52 weeks.