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Sonic Misses on Q3 Earnings and Revenues

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Sonic Automotive Inc.’s (SAH - Free Report) third quarter 2013 earnings per share of 46 cents improved 15% from 40 cents adjusted earnings in the year-ago quarter. However, earnings per share missed the Zacks Consensus Estimate by 2 cents. Earnings from continuing operations increased 4.7% to $24.7 million from $23.6 million in the year-ago quarter.

The year-ago results excluded a pre-tax charge of about $18.5 million or 19 cents per share, due to costs associated with retiring of Sonic Automotive’s outstanding 5.0% convertible senior notes due in 2029. There no relevant adjustment this year.

Sonic Automotive’s total revenue in the third quarter rose 5.4% year on year 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.

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.

Sonic Automotive expects full year 2013 earnings per share to range between $1.96 and $2.03 as against the earlier guidance of $1.93 and $2.03.

Charlotte, N.C. based Sonic Automotive is a Fortune 500 company. It is one of the prominent automotive retailers in the U.S. along with Asbury Automotive Group, Inc. (ABG - Free Report) , Lithia Motors Inc. (LAD - Free Report) and AutoNation Inc. (AN - Free Report) . The company currently operates 100 dealerships across 14 states and 25 major metropolitan markets. It represents about 25 different automotive brands with majority of the dealerships being luxury and import brands.

Currently, SAH retains a Zacks Rank #3 (Hold).

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