Sonic Automotive's (SAH) Q1 Earnings Miss, Improve Y/Y
Shares of Sonic Automotive Inc. SAH increased 15.3% to $19.04 on Apr 26, after the company reported first-quarter 2016 results. Sonic Automotive recorded adjusted earnings per share of 39 cents in the first quarter of 2016 that increased 5.4% from 37 cents earned in the year-ago quarter. However, earnings per share fell short of the Zacks Consensus Estimate of 40 cents. Adjusted net income was $18.2 million compared with $18.8 million in the first quarter of 2015.
On a reported basis, Sonic Automotive’s earnings from continuing operations came in at $14.5 million or 31 cents per share, up from $14.4 million or 28 cents per share in the prior-year quarter.
Total revenue in the quarter was $2.23 billion, almost in line with the year-ago quarter. However, the figure missed the Zacks Consensus Estimate of $2.33 billion.
Revenues from new vehicles decreased 3.1% to $1.2 billion, while the same from used vehicles improved 0.8% to $598.4 million in the quarter. Wholesale vehicle revenues rose 6.5% to $44.4 million. Revenues from parts, service and collision repair increased 7.1% to $346.1 million, while finance, insurance and other revenues grew 8.9% to $81.3 million.
Gross profit improved 3% to $345.2 million in the reported quarter from $335 million a year ago. Selling, general and administrative expenses increased to $284.4 million from $270.9 million in the year-ago quarter. The company recorded operating loss of $18.5 million compared to $16.4 million in the first quarter of 2015.
Dividend Update
The board of directors of Sonic Automotive announced a quarterly dividend of 5 cents per share. The dividend will be paid on Jul 15, to shareholders on record as of Jun 15, 2016.
Share Repurchases
In the first quarter of 2016, Sonic Automotive repurchased 4.1 million shares for $74.4 million. The company’s board of directors increased its share repurchase authorization by $100 million during the quarter. As of Mar 31, 2016, the company had around $70.6 million remaining under its share repurchases authorization. From Mar 31, through Apr 26, 2016, the company repurchased 363,000 shares for $6.4 million.
Business Update
Sonic Automotive expects that the EchoPark stores will continue to grow and mature. The company is focused on expansion in Denver. It will open two new stores in the Denver market in the second quarter of 2016 and another store by the end of this year. Sonic Automotive will also introduce the EchoPark brand in the Texas and Carolinas markets by 2017.
2016 Outlook
Sonic Automotive reaffirmed its earnings per share guidance in the range of $2.07–$2.17.
In 2016, the company will invest around $250 million for acquiring land and setting up facilities.
Charlotte, NC-based Sonic Automotive is a Fortune 500 company and one of the prominent automotive retailers in the U.S. The company currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked automobile stocks include Lear Corp. LEA, Federal-Mogul Holdings Corporation FDML and Superior Industries International, Inc. SUP. All three stocks sport a Zacks Rank #1 (Strong Buy).
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