Sonic Automotive Profits Up 16% - Analyst Blog

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Sonic Automotive Inc. ( SAH ) recorded a 16% rise in adjusted earnings per share to 43 cents in the second quarter of 2012 compared to 37 cents per share in the corresponding quarter last year. With this, the profit surpassed the Zacks Consensus Estimate of 41 cents per share. Meanwhile, reported earnings from continuing operation were $27.5 million or 46 cents per share compared to $22.9 million or 38 cents per share.

The company's total revenues for the quarter came in at $2,185.2 million, up 12.3% from $1,945.9 million in the year-ago quarter. It marginally exceeded the Zacks Consensus Estimate of $2,168 million. The increase in revenues was driven by higher revenues in all businesses as well as improved unit sales of used vehicles.

Revenues from new vehicles retailed surged 21.3% to $1,176.8 million while revenues from used vehicle (retail and wholesale) went up 4.2% to $594.0 million during the quarter. Revenues from parts and service escalated 3.2% to $304.6 million and finance and insurance business grew 18% to $65.3 million.

The company witnessed a 5% growth in gross profit to $320.7 million in the quarter compared to $305.9 million a year ago. The rise in profits was attributable to an increase in new and used vehicle unit volumes along with better performance of the finance and insurance business.

Selling, general and administrative expenses rose 5.2% to $249.5 million in the quarter. However, operating income was $59.8 million or 2.7% of sales compared with $59.1 million or 3.0% of sales in the second quarter of 2011.

Share Repurchase

The company's Board of Directors authorized an additional repurchase of $100 million shares. As a result, the company has approximately $130 million worth of shares remaining for repurchase.


The Board of Directors of Sonic Automotive approved a quarterly cash dividend of 25 cents per share. The dividend would be paid on October 15, 2012 to the stockholders of record on September 14, 2012.

Our Take

Charlotte, North Carolina-based Sonic Automotive is a Fortune 500 company. It is one of the largest automotive retailers in the U.S. The company operates 100 dealerships spread across 15 states and 26 major metropolitan markets. It represents about 30 different automotive brands with the majority of the dealerships being luxury and import brands. It competes with AutoNation Inc. ( AN ) and CarMax Inc. ( KMX ).

The company expects better performance in the future owing to its investments in technology and training programs. Currently, it retains a Zacks #3 Rank, which translates into a short-term (1 to 3 months) Hold rating. We have a long-term (more than 6 months) Neutral recommendation on the stock.

AUTONATION INC (AN): Free Stock Analysis Report

CARMAX GP (CC) (KMX): Free Stock Analysis Report

SONIC AUTOMOTVE (SAH): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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