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Why Is Sonic Automotive (SAH) Down 5.7% Since Last Earnings Report?

Zacks Equity Research

A month has gone by since the last earnings report for Sonic Automotive (SAH). Shares have lost about 5.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Sonic Automotive due for a breakout? 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 Q2 Earnings & Revenues Beat Estimates

Sonic Automotive, Inc. registered adjusted earnings per share of 62 cents in second-quarter 2019, which beat the Zacks Consensus Estimate of 47 cents. Moreover, the bottom line increased from 35 cents reported in the year-ago quarter.

Total revenues in the reported quarter amounted to $2.6 billion, up from the prior-year quarter’s figure of $2.5 billion. Additionally, revenues surpassed the Zacks Consensus Estimate of $2.5 billion.

During the reported quarter, revenues from the sale of total new vehicles fell 2.7% year over year to $1.2 billion. Revenues from the sale of total used vehicles rose 16.1% to $885.6 million. Wholesale vehicle revenues declined 6.9% to $50 million on a year-over-year basis.

Revenues from parts, services and collision repair increased 2.5% year over year to $355.3 million. Finance, insurance and other revenues rose 13.7% on a year-over-year basis to $118.3 million.

In second-quarter 2019, gross profit increased to $381 million from $362.5 million in the year-ago quarter. Selling, general and administrative expenses increased to $294.5 million from $277 million in the year-ago quarter. The company recorded operating income of $62.9 million compared with $50.6 million in the year-ago quarter.

In the quarter under review, EchoPark stores retailed 12,587 units, up 68.7% on a year-over-year basis.

Dividend & Share Repurchase

The board of directors of Sonic Automotive announced a quarterly dividend of 10 cents per share. The dividend will be paid on Oct 15, 2019, to shareholders of record as of Sep 13.
 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 28.17% due to these changes.

VGM Scores

Currently, Sonic Automotive has a nice Growth Score of B, though it is lagging a bit 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

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Sonic Automotive has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.



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