Earnings Miss: Sonic Automotive, Inc. Missed EPS By 11% And Analysts Are Revising Their Forecasts
Shareholders might have noticed that Sonic Automotive, Inc. (NYSE:SAH) filed its yearly result this time last week. The early response was not positive, with shares down 8.0% to US$52.68 in the past week. Revenues were in line with forecasts, at US$14b, although statutory earnings per share came in 11% below what the analysts expected, at US$4.97 per share. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
See our latest analysis for Sonic Automotive
Taking into account the latest results, Sonic Automotive's five analysts currently expect revenues in 2024 to be US$14.4b, approximately in line with the last 12 months. Statutory earnings per share are predicted to swell 13% to US$5.94. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$14.5b and earnings per share (EPS) of US$7.11 in 2024. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a substantial drop in EPS estimates.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$51.80, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Sonic Automotive at US$61.00 per share, while the most bearish prices it at US$35.00. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's pretty clear that there is an expectation that Sonic Automotive's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 0.4% growth on an annualised basis. This is compared to a historical growth rate of 9.3% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 5.1% annually. Factoring in the forecast slowdown in growth, it seems obvious that Sonic Automotive is also expected to grow slower than other industry participants.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Sonic Automotive. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting that it's tracking in line with expectations. Although our data does suggest that Sonic Automotive's revenue is expected to perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Sonic Automotive going out to 2026, and you can see them free on our platform here.
Even so, be aware that Sonic Automotive is showing 3 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
