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Sonic Automotive Misses Q3 Revenue Estimates

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Sonic Automotive Inc.’s (SAH - Free Report) total revenue for the third quarter of 2013 rose 5.4% to $2.24 billion. However, revenues marginally missed the Zacks Consensus Estimate of $2.29 billion. The year-over-year improvement in revenues was driven by solid performance by most business operations of the company.

Sonic Automotive recorded a tax gain in the reported quarter due to the expiry of its 5% Convertible Senior Notes in 2011 and 2012. The company is calculating the effects of this gain and will release the earnings per share and the net income of the third quarter of 2013 after the evaluation is complete. The Zacks Consensus Estimate for the third quarter earnings is 50 cents per share.

Of the total revenue, revenues from vehicle trade increased 5% to $1.9 billion. Meanwhile, revenues from parts, service and collision repair went up 7.8% to $309.6 million and from finance, insurance and other services grew 6.8% to $68.7 million.

Revenues from new vehicles retail escalated 5.5% to $1.3 billion. New vehicle retail unit sales increased 2.7% to 35,538 vehicles. New vehicle gross margins were 5.7% compared with 5.6% in the year-ago quarter.
Revenues from used vehicles retail rose 6% to $559.8 million. Used vehicle unit sales volume increased 3.8% to 27,632 vehicles. Gross margin improved to 7% from 6.7% in the year-ago period.

Overall gross margin was 14.5% in the quarter compared with 14.3% a year ago. Operating margin decreased to 2.6% from 2.7% a year ago.

Sonic Automotive completed the acquisition of Murray Mercedes Benz of Denver and Murray BMW of Denver in the third quarter of 2013. These acquisitions are expected to generate total annual revenue of around $200 million. These stores will support the existing platform of the company in Denver.

Charlotte, N.C. based Sonic Automotive is a Fortune 500 company. It is one of the largest automotive retailers in the U.S. The company currently operates 100 dealerships spread across 14 states and 25 major metropolitan markets. It represents about 25 different automotive brands with the majority of the dealerships being luxury and import brands.

Sonic Automotive increased the lower end of its full year 2013 earnings per share guidance from continuing operations to range between $1.96 and $2.03 from the earlier guidance of $1.93 and $2.03. The improved forecast was based on the expectation that earnings will lean toward the higher end of the guidance. Currently, SAH retains a Zacks Rank #2 (Buy).

Other stocks that are performing well in the automotive retail industry include Asbury Automotive Group, Inc. (ABG - Free Report) , Lithia Motors Inc. (LAD - Free Report) and AutoNation Inc. (AN - Free Report) . Asbury Automotive carries a Zacks Rank #1 (Strong Buy), while Lithia and AutoNation are Zacks Rank #2 (Buy) stocks.

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