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Why Is Sonic Automotive (SAH) Up 35.8% Since Last Earnings Report?

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A month has gone by since the last earnings report for Sonic Automotive (SAH). Shares have added about 35.8% 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 the most recent earnings report in order to get a better handle on the important drivers.

Sonic Beats Earnings, Misses Revenue Estimates in Q4

Sonic registered fourth-quarter 2020 adjusted earnings per share of $1.50 per share, which beat the Zacks Consensus Estimate of $1.43. Higher-than-expected sales and gross profit from new vehicle units led to the outperformance. The bottom line was also higher than 97 cents per share reported in the year-ago quarter. Total revenues amounted to $2,798.5 million, up 1.8% from the prior-year figure. However, revenues missed the Zacks Consensus Estimate of $2,830 million.

Key Takeaways

For the reported quarter, revenues from the sale of new vehicles fell 2.7% year over year to $1,323.4 million but surpassed the consensus mark of $1,303 million. Unit sales volume contracted 9.9% year on year to 27,566, while gross profit per unit surged 32.4% to $2,924. Gross profit totaled $80.6 million, outpacing the consensus mark of $72 million.

Revenues from the sale of used vehicles increased 10.4% from the prior-year level to $959.8 million. Unit sales contracted from 27,099 in the prior-year quarter to 25,490 for the quarter under review. Gross profit per unit dipped 23.1% year over year to $1,014.

For the quarter under review, the EchoPark segment recorded revenues of $386.9 million, reflecting a 25.4% uptick from the year-ago figure. Its stores sold 16,845 units, up 16.7% on a year-over-year basis. The segment’s gross profit climbed 10.6% from the prior-year quarter to $26.1 million.

Wholesale vehicle revenues rose 27% on a year-over-year basis to $59.2 million. Revenues from parts, services and collision repair fell 7.9% year over year to $319.1 million. Finance, insurance and other revenues came in at $137 million, up from $125.5 million recorded in the corresponding quarter of 2019.

Selling, general and administrative expenses inched up 0.7% year over year to $259 million for the quarter under review. The board of directors announced a quarterly dividend of 10 cents per share, which will be paid out on Apr 15, 2021 to shareholders of record on Mar 15, 2021. As of Sep 30, Sonic had $170.3 million of cash and cash equivalents on hand. Long-term debt summed $720.1 million.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted -10.8% due to these changes.

VGM Scores

At this time, Sonic Automotive has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

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

Outlook

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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