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Sonic Automotive (SAH) Misses on Q3 Earnings, Cuts View

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Share price of Sonic Automotive Inc. (SAH - Free Report) decreased 5.3% to $16.95 on Nov 1, after the company reported a decline in earnings in third-quarter 2016 and lowered its annual guidance. Sonic Automotive recorded adjusted earnings per share of 47 cents in the third quarter of 2016 that declined from 53 cents posted in the year-ago quarter. Earnings per share also missed the Zacks Consensus Estimate of 54 cents.

Net income, including one-time items, was $19 million or 42 cents per share compared with $27.1 million or 53 cents per share in the third quarter of 2015.

Total revenue in the reported quarter increased 2.6% to $2.56 billion. The figure also surpassed the Zacks Consensus Estimate of $2.49 billion.


Revenues from new vehicles inched up 0.5% to $1.38 billion, while that from used vehicles increased 1.4% to $661 million in the quarter. Wholesale vehicle revenues surged 85.7% to $70.5 million. Revenues from parts, service and collision repair increased 3.2% to $361.7 million, while finance, insurance and other revenues grew 4.4% to $89.6 million.

Gross profit dropped to $359.1 million in the reported quarter from $360.3 million a year ago. Selling, general and administrative expenses increased to $282.1 million from $280 million in the year-ago quarter. The company recorded operating income of $50.9 million compared to $62.9 million in the third quarter of 2015.

SONIC AUTOMOTVE Price, Consensus and EPS Surprise


SONIC AUTOMOTVE Price, Consensus and EPS Surprise | SONIC AUTOMOTVE Quote

Dividend Update

The board of directors of Sonic Automotive announced a quarterly dividend of 5 cents per share. The dividend will be paid on Jan 13, 2017, to shareholders on record as of Dec 15, 2016.

Share Repurchases

In the third quarter of 2016, Sonic Automotive repurchased 579,000 shares for $10 million. Year to date, the company has invested $97.5 million toward share repurchases.

Business Update

Sonic Automotive opened two new EchoPark stores during the third quarter. It will open another store in Denver and start the construction of an EchoPark store in Texas in the first half of 2017. 

Sonic Automotive started operations in the Mercedes-Benz open-point in McKinney, TX during the quarter. This store is expected to contribute revenues of over $100 million once the ramp up is completed. Further, the company started the construction of the Pensacola Audi open-point during the quarter. This store is expected to open in the first quarter of 2017. It is likely to generate annual revenues of over $50 million when fully operational. Sonic Automotive will also open the Nissan open-point in Cleveland, TN by the end of the year. This store is expected to generate annual revenues of over $30 million. 

2016 Outlook

Sonic Automotive expects earnings per share in fourth-quarter 2016 to be in the range of 59−69 cents, compared to the prior range of 66−69 cents. Adjusted earnings for the year are expected to be $1.95−$2.05 per share, down from the prior range of $2.07−$2.17.

Zacks Rank

Charlotte, NC-based Sonic Automotive is a Fortune 500 company and one of the prominent automotive retailers in the U.S. The company currently carries a Zacks Rank #4 (Sell).

Some better-ranked auto stocks include America's Car-Mart Inc. (CRMT - Free Report) , Gentex Corp. (GNTX - Free Report) and Rush Enterprises, Inc. (RUSHA - Free Report) .

America's Car-Mart has witnessed positive estimate revisions over the last 30 days. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Rush Enterprises, carrying a Zacks Rank #2 (Buy), has a long-term expected growth rate of 15%, compared to the industry average of 12.10%.

Gentex, also a Zacks Rank #2 stock, has a long-term expected growth rate of 11.20%.

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