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Sonic Automotive Inc Class A - Stock Quote SAH

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Morningstar's Sonic Automotive Inc Class A Stock Analysis

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Sonic Has Record Q1 Results, but EchoPark Fighting High Used-Vehicle Pricing

Analyst Note

| David Whiston, CFA, CPA, CFE |

Sonic Automotive’s first-quarter EPS of $2.33, an 89.4% year-over-year increase, was a first-quarter record but fell short of the Refinitiv consensus of $2.37. We don't see a reason to change our fair value estimate and remain confident that Sonic has a long growth runway in a slowly consolidating yet highly fragmented sector. Same-store franchise dealer revenue rose 4.6% and total same-store franchise gross profit dollars rose 26.9% despite a 14.5% decline in new-vehicle unit sales and a 16.2% decline in used-vehicle sales. These numbers are a function of much higher pricing power at dealerships due to hardly any new-vehicle inventory, which enabled new-vehicle gross profit per unit to rise 134% to $6,799 and used-vehicle GPU to grow 36% to $1,728. Cash is coming back to shareholders with the quarterly dividend more than doubling in 2022 to $0.25 per share and share repurchases in the quarter totaling $76.1 million at an average price of $44.76 per share, by our calculation. We expect strong pricing to continue this year and Sonic’s earnings are typically lowest in the first quarter and highest in the fourth quarter as the latter is a strong time for premium brands.

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Sonic Automotive Inc Class A's Company Profile

Business Description

Sonic Automotive is one of the largest auto dealership groups in the United States. The company has 110 franchised stores in 17 states, primarily in metropolitan areas in California, Texas, and the Southeast, plus 47 EchoPark and Northwest Motorsport brand used-vehicle stores. In addition to new- and used-vehicle sales, the company derives revenue from parts and collision repair, finance, insurance, and wholesale auctions. Luxury and import dealerships make up about 88% of new-vehicle revenue, while Honda, BMW, Mercedes, and Toyota constitute about 60% of new-vehicle revenue. BMW is the largest brand at over 26%. 2021's revenue was $12.4 billion, with EchoPark's portion totaling $2.3 billion. Sonic bought RFJ Auto in December 2021, which added $3.2 billion in sales.

4401 Colwick Road
Charlotte, NC, 28211
T +1 704 566-2400
Sector Consumer Cyclical
Industry Auto & Truck Dealerships
Most Recent Earnings Mar 31, 2022
Fiscal Year End Dec 31, 2022
Stock Type Cyclical
Employees 10,200

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