U.S. Markets open in 4 hrs 43 mins

Bull of the Day: Sonic Automotive (SAH)

Madeleine Johnson

One of the largest auto retailers in the U.S., Sonic Automotive (SAH) is a company with dealership franchises that sell new and used cars; the sale of replacement parts; vehicle maintenance, warranty, paint and repair services; and arrangement of extended warranty contracts.

Q1 Earnings Cement Growth Promise

Earnings of 62 cents per share and revenues of $2.6 billion easily beat the Zacks Consensus Estimate.

But the biggest surprise of the quarter came from its EchoPark pre-owned vehicle retail chain. Even though it only accounts for about 10% of Sonic’s total sales, the company expects EchoPark to bring in over $1 billion in revenue this year; it generated revenue of $249.6 million in Q1, increasing 90% year-over-year.

EchoPark also became profitable in Q1, bringing in profits of $0.2 million before taxes.

“As we expand our footprint into other areas across the country, we believe EchoPark will exceed the overall volumes and profitability of our franchised dealerships,” said CEO David Smith.

Sonic doesn’t provide guidance, but analysts expect the company’s top line to grow 70% this year and bottom line to increase 15%.

SAH is Soaring

Sonic Automotive, Inc. Price and Consensus

 

Shares of Sonic soared this year, jumping more than 100% compared to the S&P 500’s return of roughly 15%.

Earnings estimates have since been rising, and the stock is now a Zacks Rank #1 (Strong Buy).

For the current fiscal year, four analysts have revised their earnings estimate upwards in the last 60 days, and the Zacks Consensus Estimate risen 18 cents from $2.07 to $2.25. 2020 looks pretty strong too, with earnings and revenue expected to show positive year-over-year growth.

SAH currently trades at 11.8X its forward full-year earnings estimates, a discount compared to the broader Retail-Wholesale Market. If Sonic can continue to capitalize and expand on EchoPark, investors can likely expect to see further upside to shares.

Thanks to EchoPark’s soaring sales, the future is looking promising for Sonic Automotive. If you’re an investor searching for a broader retail sector stock to add to your portfolio, make sure to keep SAH on your shortlist.

This Could Be the Fastest Way to Grow Wealth in 2019

Research indicates one sector is poised to deliver a crop of the best-performing stocks you'll find anywhere in the market. Breaking news in this space frequently creates quick double- and triple-digit profit opportunities.

These companies are changing the world – and owning their stocks could transform your portfolio in 2019 and beyond. Recent trades from this sector have generated +98%, +119% and +164% gains in as little as 1 month.

Click here to see these breakthrough stocks now >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Sonic Automotive, Inc. (SAH) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research