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Sonic Automotive Inc Class A SAH

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Morningstar’s Analysis

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1-Star Price

PREMIUM

5-Star Price

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Economic Moat

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Capital Allocation

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Like Its Peer Dealers We Cover, Sonic’s Third Quarter Is a Record

Analyst Note

| David Whiston, CFA, CPA, CFE |

Sonic reported record third-quarter results with diluted EPS from continuing operations up 51.9% year over year to $1.96, beating the Refinitiv consensus of $1.92. Sonic announced a third-quarter revenue and EBITDA outlook in an Oct. 13 8-K and actual respective results of $3.1 billion and $150.8 million were within the ranges given in the 8-K. The acquisition of RFJ Auto (see our Sept. 22 note) remains on track for a December close and we see no reason to change our fair value estimate. Earlier this month Sonic amended its credit lines to bring lending and floorplan lending commitments to $2.95 billion, from $1.8 billion, and issued $1.15 billion in aggregate 2029 and 2031 unsecured senior notes at a blended interest rate of 4.73% to help pay for the RFJ deal and repay other debt.

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Company Profile

Business Description

Sonic Automotive is by our estimate the sixth- largest public auto dealership group in the United States by new-vehicle unit sales. The company has 87 franchised stores in 12 states, primarily in metropolitan areas in California, Texas, and the Southeast, plus about 30 EchoPark 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 24%. 2020's revenue was $9.8 billion, with EchoPark's portion totaling $1.4 billion. Sonic is buying RFJ Auto in December, which could add $3.2 billion in sales.

Contact
4401 Colwick Road
Charlotte, NC, 28211
T +1 704 566-2400
Sector Consumer Cyclical
Industry Auto & Truck Dealerships
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2020
Stock Type Cyclical
Employees 8,100

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