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What's in the Offing for Sonic Automotive (SAH) Q3 Earnings?

Zacks Equity Research

Sonic Automotive, Inc. SAH is slated to release third-quarter 2019 results on Oct 24, before the opening bell. The current Zacks Consensus Estimate for the quarter to be reported is a profit of 57 cents a share on revenues of $2.63 billion.

The U.S.-based automotive retailer recorded better-than-expected results in the last reported quarter, mainly backed by 61.9% year-over-year revenue growth in the EchoPark segment.

As far as earnings surprises are concerned, Sonic Automotive is on an excellent footing, having surpassed the Zacks Consensus Estimate in each of the last four quarters, the average beat being 29.50%. This is depicted in the graph below:

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 Top and Bottom-Line Estimates Headed?

The Zacks Consensus Estimate for the third-quarter earnings per share of 57 cents has remained unchanged in the past 30 days. This compares favorably with the year-ago quarter’s reported earnings of 43 cents per share. The Zacks Consensus Estimate for revenues is pegged at $2.63 billion, suggesting an uptick of 6.6% from the prior-year reported figure.

Factors Setting the Tone

Sonic’s focus on store expansions and bolstering the used-vehicle business is likely to have boosted the firm’s top-line growth. The firm’s used-car segment, EchoPark, is expected to have buoyed its quarterly performance. While majority of investors’ interests surround the company’s EchoPark unit, Sonic’s new vehicle franchise business also remains strong and is expected to have grown organically via accretive acquisitions.

Sonic is anticipated to have recorded significant volume growth at its Fort Mill Ford store in third-quarter 2019. The company’s CarCash app, expected to have launched in August 2019, is likely to have enhanced the customers’ shopping experience and the firm’s sales volumes.

The company’s margin-expansion drive and prudent expense-control moves are likely to have continued in the quarter, boosting cash flows.

However, soft performance of its BMW and Honda dealerships are likely to have adversely impacted gross margins in the to-be-reported quarter.

Per Sonic, the interest-rate environment will likely have remained challenging in the third quarter. Given the firm’s luxury product mix with higher-than-average inventory values, rising interest rates are likely to have strained profitability in the quarter.

What the Zacks Model Says?

Our proven model does not conclusively predict an earnings beat for Sonic this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Sonic has an Earnings ESP of 0.00%. This is because both, the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at 57 cents.

Zacks Rank: Sonic currently sports a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks to Consider

Here are some companies, which according to our model have the right combination of elements to post an earnings beat in the to-be-reported quarter.

American Airlines Group Inc. AAL has an Earnings ESP of +1.64% and is a Zacks #3 Ranked player. The company is anticipated to release third-quarter 2019 earnings on Oct 24.

Alliance Data Systems Corporation ADS is set to release third-quarter earnings on Oct 24. The company has an Earnings ESP of +1.34% and carries a Zacks Rank #3, at present.

Allegiant Travel Company ALGT is scheduled to report quarterly figures on Oct 24. The stock has an Earnings ESP of +1.39% and holds a Zacks Rank #3, currently.

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