Why Is Sonic Automotive (SAH) Down 57.4% Since Last Earnings Report?

A month has gone by since the last earnings report for Sonic Automotive (SAH). Shares have lost about 57.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Sonic Automotive due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Sonic Automotive Q3 Earnings Beat Estimates, Up Y/Y

Sonic Automotive registered adjusted earnings per share of 97 cents in fourth-quarter 2019, beating the Zacks Consensus Estimate of 89 cents. Moreover, the bottom line rose from 76 cents per share reported in the year-ago quarter. The outperformance was driven by higher-than-expected gross profit from new and used-vehicle units.

Total revenues in the reported quarter amounted to $2,748.4 million, up 6.7% from the prior-year period. However, revenues missed the Zacks Consensus Estimate of $2,766 million.

Key Takeaways

During the reported quarter, revenues from the sale of new vehicles grew 3% year over year to $1,360.1 million. Gross profit increased to $67.6 million from $65.8 million recorded in the year-ago period. The metric also surpassed the consensus mark of $64 million.

Revenues from the sale of total used vehicles rose 15% from the prior-year quarter to $869.7 million. Unit sales rose from 35,135 a year ago to 39,775 in the quarter under review. Gross profit increased 9.6% year over year to $36.8 million in the fourth quarter of 2019. The metric also topped the Zacks Consensus Estimate of $36 million.

Wholesale vehicle revenues decreased 6.6% on a year-over-year basis to $46.6 million. Nonetheless, gross loss narrowed from $2.2 million in the year-ago quarter to $1.3 million.

Revenues from parts, services and collision repair grew 2.1% year over year to $346.5 million. Gross profit increased $165.3 million in the quarter under review from $163.8 million in the year-ago period.

Finance, insurance and other revenues rose 14.5% on a year-over-year basis to $125.5 million.

Selling, general and administrative expenses decreased to $260.9 million from $273.9 million in the year-ago quarter. The company recorded operating income of $92.2 million compared with $58.7 million in the year-ago quarter.

In the quarter under review, the EchoPark segment recorded revenues of $308.6 million, reflecting a 52% uptick from the year-ago figure. Its stores sold 12,676 units, up 45% on a year-over-year basis. The segment registered income of $2.1 million, up 145% year over year.

Dividend Payment

The board of directors announced a quarterly dividend of 10 cents per share, which will be paid on Apr 15, 2020 to its shareholders of record as of Mar 13, 2020.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

VGM Scores

At this time, Sonic Automotive has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Sonic Automotive has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.