) has been advancing thanks to solid third quarter results, a
raised full-year outlook, an impressive debt profile and improving
market conditions. The automotive retailer reached a 52-week high
of $23.28 on January 4. With double-digit earnings growth expected
for 2012 and beyond, SAH has become a Zacks Rank #1 (Strong Buy).
Strong Earnings Growth in Q3
On October 23, Sonic Automotive posted third quarter earnings of 40
cents per share, which fell short of the Zacks Consensus Estimate
but rose 17.6% from a year earlier. Revenues grew 11.7% to $2.2
The increase in revenues was mainly attributable to a solid 25.2%
growth in new vehicle sales to 33,737 units, which is the second
highest level achieved by the company in its history. Its selling,
general and administrative expenses as a percentage of sales also
improved to 11.1% from 11.9% in the year-ago quarter.
The company upgraded it adjusted earnings per share guidance for
full-year 2012 to between $1.65 and $1.70 from the earlier view of
$1.62 to $1.70. Furthermore, the company has no public debt
maturity before more than 5 years, which positions it well for
Earnings Estimate Revisions
The Zacks Consensus Estimate for 2012 is at $1.67 per share, which
is up 0.6% in the past 7 days. The Zacks Consensus Estimate for
2013 is at $1.98. The estimates for 2012 and 2013 suggest
year-over-year growth of 20.1% and 18.5%, respectively.
Sonic Automotive's valuation looks reasonable with shares trading
at a forward P/E of 11.4x, which is at a 5% discount to the peer
group average of 12.0x. Meanwhile, the price-to-book of 2.1x is
below the peer group average of 2.2x and the price-to-sales of 0.2x
is on par with the peer group average. The company has a higher
1-year ROE of 17.5% versus the peer group average of 16.9%.
Technically, a new trend formed in the third quarter of 2012 when
the 50-day moving average crossed above the 200-day moving average.
This bullish situation is stable, as the 50-day moving average lies
above the 200-day moving average. Sonic is currently trading above
its 50- and 200-day moving averages, which stand at $19.92 and
Volume averages roughly 347K daily. The stock has returned 51.5% in
the past year, which is substantially higher than the S&P 500's
return of 16.6%.
Sonic Automotive is one of the largest automotive retailers in the
U.S. The $1.3 billion company operated 113 dealerships in 15 states
and 23 collision repair centers as of September 30, 2012. It
represents about 25 different automotive brands with the majority
of the dealerships being luxury and import brands.
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