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Sonic Automotive (SAH) to Post Q2 Earnings: What's in Store?

Zacks Equity Research

Sonic Automotive SAH is set to release second-quarter 2020 results on Jul 30, before market open. The Zacks Consensus Estimate for the quarter’s earnings is pegged at 31 cents per share on revenues of $2.23 billion.

Sonic Automotive, one of the largest retailers of the world, reported better-than-expected results in first-quarter 2020, primarily on solid contribution from the used-vehicle segment. The company beat estimates in each of the trailing four quarters, the average surprise being 39.17%. This is depicted in the graph below:

Sonic Automotive, Inc. Price and Consensus

Sonic Automotive, Inc. Price and Consensus
Sonic Automotive, Inc. Price and Consensus

Sonic Automotive, Inc. price-consensus-chart | Sonic Automotive, Inc. Quote

Which Way are the Estimates Headed?

The Zacks Consensus Estimate for Sonic Automotive’s second-quarter earnings per share has been revised upward by 17 cents to 31 cents in the past seven days. The figure, however, indicates a year-over-year slump of 50%. The Zacks Consensus Estimate for revenues suggests a year-over-year decrease of 14.81%.

Key Factors

The company’s EchoPark brand of standalone used-vehicle stores is likely to have aided top-line growth in the to-be-reported quarter. Sonic Automotive’s focus on store expansions, customer-centric shopping experience and high-quality vehicle offerings are expected to have contributed to revenue growth. As the states eased lockdown restrictions, it started to witness recoveries across its segments, especially the EchoPark unit. As the company reported, significant progress was witnessed in May, with sales of all stores used vehicle unit in the EchoPark segment increasing 9% year over year compared with the 30% plunge witnessed in April.

Further, Sonic Automotive’s cost-containment strategies in the quarter are likely to have supported cash flow and offered some respite from the pandemic-induced financial crisis. The firm started offering a no-contact purchase experience in the quarter, which is anticipated to have allowed 90% of a vehicle transaction to be completed on its website or by phone and delivered to the guest with a safe, no-contact home delivery. These e-commerce initiatives undertaken by the firm are also likely to have boosted sales.

However, Sonic Automotive might have registered a decline in sales of new vehicles amid industry headwinds during the April-June quarter. The Zacks Consensus Estimate for the company’s new vehicles segment’s quarterly net sales is pegged at $874 million, lower than the year-ago quarter’s $1,205 million. Further, the second-quarter sales estimate for the parts, services and collision repair segment is pinned at $268 million, lower than the year-earlier quarter’s $355 million. The Zacks Consensus Estimate for its finance, insurance and other segment’s to-be-reported quarter net sales is pegged at $80 million, lower than the second-quarter 2019 figure of $118 million.

What the Zacks Model Says

Our proven model does not conclusively predict an earnings beat for Sonic Automotive this time around. The combination of a positive Earnings ESPand a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. However, that is not the case here as elaborated below. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: Sonic Automotive has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Sonic Automotive flaunts a Zacks Rank of 1 (Strong Buy) currently.

Stocks to Consider

Here are a few stocks worth considering, as these have the right combination of elements to come up with an earnings beat this time around:

Magna International Inc. MGA has an Earnings ESP of +6.52% and carries a Zacks Rank #2 at present. The company is slated to release second-quarter 2020 earnings on Aug 7.

Lear Corporation LEA has an Earnings ESP of +3.50% and currently carries a Zacks Rank #2. The company is scheduled to report quarterly numbers on Aug 4.

Ford Motor Company F has an Earnings ESP of +13.66% and carries a Zacks Rank #3 currently. The company is set to announce earnings figures on Jul 30.

These Stocks Are Poised to Soar Past the Pandemic

The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.

Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.

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Ford Motor Company (F) : Free Stock Analysis Report
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