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Sonic Automotive (SAH) Up 27.6% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

A month has gone by since the last earnings report for Sonic Automotive (SAH). Shares have added about 27.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Sonic Automotive due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Sonic Automotive Q1 Earnings Top, Sales Miss Estimates

Sonic Automotive registered adjusted earnings per share of 40 cents in first-quarter 2020, beating the Zacks Consensus Estimate of 20 cents. Higher sales from the used vehicle unit led to outperformance. Moreover, the bottom line was a penny higher than 39 cents per share reported in the year-ago quarter on the back of solid performance from the EchoPark segment.

However, total revenues in the reported quarter amounted to $2,308 million, down 3.4% from the prior-year period. Further, revenues missed the Zacks Consensus Estimate of $2,325 million.

Key Takeaways

During the reported quarter, revenues from the sale of new vehicles fell 10% year over year to $959.5 million. Gross profit decreased to $45.4 million from $53.8 million recorded in the year-ago period.

Revenues from the sale of total used vehicles rose 3.6% from the prior-year quarter to $850 million. The metric also topped the consensus mark of $794 million. Unit sales rose from 38,463 a year ago to 40,024 in the quarter under review. While gross profit decreased 13.2% year over year to $32.1 million, the metric topped the Zacks Consensus Estimate of $31.7 million.

In the quarter under review, the EchoPark segment recorded revenues of $331.7 million, reflecting a 33% uptick from the year-ago figure. Its stores sold 13,986 units, up 27% on a year-over-year basis. The segment registered income of $2.1 million, unchanged from the year ago-quarter.

Wholesale vehicle revenues decreased 11.4% on a year-over-year basis to $48.5 million. Nonetheless, gross loss narrowed from $1.26 million in the year-ago quarter to $157,000.

Revenues from parts, services and collision repair fell 2% year over year to $334.7 million. Gross profit decreased $157.9 million in the quarter under review from $163.2 million in the year-ago period.

Finance, insurance and other revenues rose 8.5% on a year-over-year basis to $115.3 million.

Selling, general and administrative expenses increased to $282.2 million from $247.1 million in the year-ago quarter.

The board of directors announced a quarterly dividend of 10 cents per share, which will be paid on Jul 15, 2020 to shareholders of record on Jun 15, 2020. As of Apr 28, Sonic Automotive had $304.0 million of cash and cash equivalents on hand.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 21.07% due to these changes.

VGM Scores

At this time, Sonic Automotive has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Sonic Automotive has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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