Sonic Automotive (NYSE:SAH) Inc. reported record third-quarter total revenues of $3.6 billion, marking a 6% increase from the same period last year, according to InvestingPro data. The company also posted an earnings per share (EPS) of $1.92, with an adjusted EPS of $2.02. The results were buoyed by improvements in new vehicle production and inventory levels.
Key takeaways from the earnings call:
- Sonic Automotive reported a decline in wholesale auction prices for three-year-old vehicles by 5% in Q3.
- The company's EchoPark segment posted revenues of $627 million, up by 6% from the previous year, and a record gross profit of $53 million.
- Sonic Automotive repurchased 1.7 million shares of its Class A common stock in Q3 and increased its quarterly cash dividend by 3.4% to $0.30 per share. This aligns with an InvestingPro Tip that highlights the company's aggressive share buyback strategy.
- The company ended Q3 with $797 million in available liquidity.
- Sonic Automotive plans to expand EchoPark, focusing on disciplined growth and profitability.
- The company is preparing for potential market uncertainties, including a focus on selling older vehicles due to a shortage of newer used vehicles.
- The company is considering dealership acquisitions but will prioritize investments that benefit the overall business, including EV preparation and technology.
During the earnings call, Sonic Automotive executives outlined their plans for EchoPark, a car sales platform. They intend to grow the platform by opening larger selling hubs in major metropolitan areas, but only when inventory and pricing conditions are favorable. The executives acknowledged the volatile used car market but expressed preparedness for future uncertainties.
The company also highlighted the success of EchoPark's restructuring, which led to increased unit sales. They have adapted to the shortage of newer used vehicles by focusing on selling older ones, yielding positive results. EchoPark has also seen higher profits from servicing electric vehicles compared to internal combustion engine vehicles.
The executives emphasized the importance of disciplined growth and profitability, underlining the need to invest in EV preparation and technology. They also stressed the need to return capital to shareholders. The company is considering dealership acquisitions but will prioritize investments that benefit the overall business.
Sonic Automotive also discussed plans to increase the number of units per store rooftop from the current range of 300 back to 550. They acknowledged the next 18-24 months will be uncertain but expressed confidence in the growth of new inventory and the introduction of electric vehicles. The company emphasized the need for flexibility in its store expansion plans to mitigate potential market fluctuations.
The company concluded the call by discussing its disciplined inventory management strategy, which includes a 20-day supply on the front line and a 10-day supply in the pipeline. They acknowledged that this approach may result in some lost sales but believe it is beneficial in the current market. They also noted a potential mismatch between electric vehicle (EV) production and inventory levels, with some areas requiring heavy discounting to sell EVs. They expect manufacturers to offer discounts in the coming quarters, which they believe will drive sales and profitability.
For more insights, including additional InvestingPro Tips, such as the company's strong return over the last five years and the expectation of net income growth this year, visit InvestingPro.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.