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Here's Why You Should Retain Sonic Stock in Your Portfolio
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Key Takeaways
Sonic Automotive's fixed operations, F&I and Powersports gains are strengthening business diversification.
EchoPark revenues rose 15%, while retail used-vehicle volume increased 17% in the second quarter.
High leverage, vehicle affordability pressures and rising floor plan interest remain key concerns for SAH.
Sonic Automotive, Inc. (SAH - Free Report) is poised to benefit from strengthened diversification as fixed operations, F&I and Powersports deliver solid growth. EchoPark also continues to expand revenues and used-vehicle volume through stronger sourcing and digital investments. However, new-vehicle affordability pressures, higher floor plan interest and a stretched balance sheet remain concerns. EchoPark’s lower EBITDA and continued marketing and expansion investments could limit near-term margin leverage.
Let’s dig deeper and see why this Zacks Rank #3 (Hold) stock is worth retaining in your portfolio.
Acquisition of Dealerships, Strength in EchoPark Aid Sonic
Sonic’s mix of vehicle sales, fixed operations and F&I reduces dependence on front-end vehicle margins. In the second quarter of 2026, reported fixed operations gross profit rose 6% to an all-time quarterly record of $263.8 million, while same-store gross profit increased 2%. Reported F&I gross profit increased 2% to a second-quarter record of $147.9 million, although same-store F&I gross profit declined 1% and GPU fell 4% to $2,619. Fixed operations and F&I still represented more than 75% of Franchised Dealerships' gross profit. The company continues to target mid-single-digit same-store fixed operations gross profit growth for full-year 2026 through value pricing and service-focused marketing.
Sonic’s 2025 purchase of four Jaguar and Land Rover businesses expanded its luxury exposure. Land Rover accounted for 9% of Franchised Dealerships' new-vehicle revenues in the second quarter of 2026, up from 5% in the second quarter of 2025. In the first half of 2026, Sonic also invested $66.3 million in six Powersports locations. In August 2026, SAH acquired Porsche Walnut Creek, expanding its Bay Area presence, strengthening its Porsche relationship and advancing its luxury retail strategy. Its franchise and Powersports acquisition pipeline remain active, supporting portfolio expansion when opportunities meet return and strategic criteria.
The acquisition of five Harley-Davidson dealerships strengthens Sonic’s diversification strategy and expands its exposure to the faster-growing powersports retail market. The acquired dealerships are expected to add about $100 million of annualized revenues. In the second quarter of 2026, Powersports revenues rose 53% to $73.5 million, gross profit increased 58% to $19.7 million, and adjusted EBITDA advanced 145% to $4.9 million. Same-store revenues and gross profit each rose 13%, complementing acquisition-driven growth.
Sonic is investing in EchoPark’s digital tools, including its app and broader digital retail platform, to support an omnichannel buying process. EchoPark revenues increased 15% in the second quarter of 2026 to $582.9 million as retail used-vehicle volume rose 17% to 19,601 units. Non-auction sourcing reached 42% of sales, up from 32% in the first quarter of 2026, helping broaden access to more affordable inventory. The company now targets 12% to 15% full-year 2026 retail used-unit growth and total GPU of $3,100 to $3,300. Digital updates are being completed ahead of fourth-quarter brand marketing, and Sonic expects one Orlando opening in the fourth quarter of 2026 followed by two to four new locations in 2027.
Sonic repurchased 2.2 million Class A shares for $142 million in the first half of 2026, leaving $527.9 million of authorization as of June 30, 2026. Sonic has raised its dividend seven times in the last five years with an annualized dividend growth rate of 20.57%.
High Leverage, Vehicle Affordability Ail SAH
The company’s stretched balance sheet remains a concern. SAH ended the second quarter of 2026 with $1.57 billion in long-term debt, up from $1.56 billion as of Dec. 31, 2025. Long-term debt-to-capital is 0.65 versus the industry’s 0.27. Times interest earned is 2.55, below the industry’s 4.35.
Vehicle affordability remains Sonic’s most significant near-term challenge. Same-store new-vehicle GPU declined 16% year over year to $2,872 in the second quarter, while the company expects potential further compression in the third and fourth quarters due to tariff-related affordability pressures. The industry vehicle prices and monthly payments have reached levels that are increasingly difficult for consumers to absorb. While this environment could benefit used-vehicle demand, it creates uncertainty for new-vehicle volumes and profitability. Continued pricing pressure may force Sonic to prioritize unit sales over margins, limiting earnings growth in its franchised dealership business.
Sonic guides an approximately 10% increase in floor plan interest expense in 2026 versus 2025. Because floor plan expense is tied to invoice values, tariff-related price inflation can raise financed inventory balances. In the second quarter of 2026, floor plan interest expense rose 14% year over year to $20.9 million.
In the second quarter of 2026, EchoPark adjusted EBITDA fell 15% year over year to $13.9 million as total GPU declined. For 2026, adjusted EBITDA guidance remains $35 million to $40 million, with $8 million to $12 million of incremental brand marketing in the fourth quarter of 2026. SAH expects one Orlando opening in the fourth quarter of 2026 and two to four locations in 2027, limiting margin leverage.
Price Performance, Valuation and Estimates
SAH has outperformed the Zacks Automotive - Retail and Whole Sales industry in the last six months. Its shares have gained 29% compared with the industry’s growth of 14.3%.
Image Source: Zacks Investment Research
From a valuation perspective, SAH appears undervalued. Going by its price/sales ratio, the company is trading at a forward sales multiple of 0.16, lower than the industry’s 0.3.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for SAH’s 2026 and 2027 EPS has improved 2 cents and 3 cents, respectively, in the past 30 days.
The Zacks Consensus Estimate for CYD’s 2026 sales and earnings implies year-over-year growth of 58.6% and 68.6%, respectively.
The Zacks Consensus Estimate for GTX’s 2026 sales and earnings implies year-over-year growth of 7.2% and 25.7%, respectively. The EPS estimate for 2026 and 2027 has improved 10 cents each over the past 30 days.
View the Zacks #1 Rank List
Image: Bigstock
Here's Why You Should Retain Sonic Stock in Your Portfolio
Key Takeaways
Sonic Automotive, Inc. (SAH - Free Report) is poised to benefit from strengthened diversification as fixed operations, F&I and Powersports deliver solid growth. EchoPark also continues to expand revenues and used-vehicle volume through stronger sourcing and digital investments. However, new-vehicle affordability pressures, higher floor plan interest and a stretched balance sheet remain concerns. EchoPark’s lower EBITDA and continued marketing and expansion investments could limit near-term margin leverage.
Let’s dig deeper and see why this Zacks Rank #3 (Hold) stock is worth retaining in your portfolio.
Acquisition of Dealerships, Strength in EchoPark Aid Sonic
Sonic’s mix of vehicle sales, fixed operations and F&I reduces dependence on front-end vehicle margins. In the second quarter of 2026, reported fixed operations gross profit rose 6% to an all-time quarterly record of $263.8 million, while same-store gross profit increased 2%. Reported F&I gross profit increased 2% to a second-quarter record of $147.9 million, although same-store F&I gross profit declined 1% and GPU fell 4% to $2,619. Fixed operations and F&I still represented more than 75% of Franchised Dealerships' gross profit. The company continues to target mid-single-digit same-store fixed operations gross profit growth for full-year 2026 through value pricing and service-focused marketing.
Sonic’s 2025 purchase of four Jaguar and Land Rover businesses expanded its luxury exposure. Land Rover accounted for 9% of Franchised Dealerships' new-vehicle revenues in the second quarter of 2026, up from 5% in the second quarter of 2025. In the first half of 2026, Sonic also invested $66.3 million in six Powersports locations. In August 2026, SAH acquired Porsche Walnut Creek, expanding its Bay Area presence, strengthening its Porsche relationship and advancing its luxury retail strategy. Its franchise and Powersports acquisition pipeline remain active, supporting portfolio expansion when opportunities meet return and strategic criteria.
The acquisition of five Harley-Davidson dealerships strengthens Sonic’s diversification strategy and expands its exposure to the faster-growing powersports retail market. The acquired dealerships are expected to add about $100 million of annualized revenues. In the second quarter of 2026, Powersports revenues rose 53% to $73.5 million, gross profit increased 58% to $19.7 million, and adjusted EBITDA advanced 145% to $4.9 million. Same-store revenues and gross profit each rose 13%, complementing acquisition-driven growth.
Sonic is investing in EchoPark’s digital tools, including its app and broader digital retail platform, to support an omnichannel buying process. EchoPark revenues increased 15% in the second quarter of 2026 to $582.9 million as retail used-vehicle volume rose 17% to 19,601 units. Non-auction sourcing reached 42% of sales, up from 32% in the first quarter of 2026, helping broaden access to more affordable inventory. The company now targets 12% to 15% full-year 2026 retail used-unit growth and total GPU of $3,100 to $3,300. Digital updates are being completed ahead of fourth-quarter brand marketing, and Sonic expects one Orlando opening in the fourth quarter of 2026 followed by two to four new locations in 2027.
Sonic repurchased 2.2 million Class A shares for $142 million in the first half of 2026, leaving $527.9 million of authorization as of June 30, 2026. Sonic has raised its dividend seven times in the last five years with an annualized dividend growth rate of 20.57%.
High Leverage, Vehicle Affordability Ail SAH
The company’s stretched balance sheet remains a concern. SAH ended the second quarter of 2026 with $1.57 billion in long-term debt, up from $1.56 billion as of Dec. 31, 2025. Long-term debt-to-capital is 0.65 versus the industry’s 0.27. Times interest earned is 2.55, below the industry’s 4.35.
Vehicle affordability remains Sonic’s most significant near-term challenge. Same-store new-vehicle GPU declined 16% year over year to $2,872 in the second quarter, while the company expects potential further compression in the third and fourth quarters due to tariff-related affordability pressures. The industry vehicle prices and monthly payments have reached levels that are increasingly difficult for consumers to absorb. While this environment could benefit used-vehicle demand, it creates uncertainty for new-vehicle volumes and profitability. Continued pricing pressure may force Sonic to prioritize unit sales over margins, limiting earnings growth in its franchised dealership business.
Sonic guides an approximately 10% increase in floor plan interest expense in 2026 versus 2025. Because floor plan expense is tied to invoice values, tariff-related price inflation can raise financed inventory balances. In the second quarter of 2026, floor plan interest expense rose 14% year over year to $20.9 million.
In the second quarter of 2026, EchoPark adjusted EBITDA fell 15% year over year to $13.9 million as total GPU declined. For 2026, adjusted EBITDA guidance remains $35 million to $40 million, with $8 million to $12 million of incremental brand marketing in the fourth quarter of 2026. SAH expects one Orlando opening in the fourth quarter of 2026 and two to four locations in 2027, limiting margin leverage.
Price Performance, Valuation and Estimates
SAH has outperformed the Zacks Automotive - Retail and Whole Sales industry in the last six months. Its shares have gained 29% compared with the industry’s growth of 14.3%.
Image Source: Zacks Investment Research
From a valuation perspective, SAH appears undervalued. Going by its price/sales ratio, the company is trading at a forward sales multiple of 0.16, lower than the industry’s 0.3.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for SAH’s 2026 and 2027 EPS has improved 2 cents and 3 cents, respectively, in the past 30 days.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks in the auto space are China Yuchai International Limited (CYD - Free Report) and Garrett Motion Inc. (GTX - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for CYD’s 2026 sales and earnings implies year-over-year growth of 58.6% and 68.6%, respectively.
The Zacks Consensus Estimate for GTX’s 2026 sales and earnings implies year-over-year growth of 7.2% and 25.7%, respectively. The EPS estimate for 2026 and 2027 has improved 10 cents each over the past 30 days.