Bank of America Securities analyst John Murphy has maintained their bearish stance on SAH stock, giving a Sell rating yesterday.
John Murphy has given his Sell rating due to a combination of factors that indicate Sonic Automotive’s less than favorable financial performance and outlook. In the fourth quarter of 2023, Sonic Automotive’s adjusted earnings per share from continuing operations fell short of both the Bank of America’s estimate and the Bloomberg consensus. The underperformance was mainly attributed to weaknesses in the used vehicle market and Finance & Insurance (F&I) sectors. Furthermore, the overall recovery of the U.S. auto market did not translate into success for Sonic, especially in its EchoPark used vehicles segment, prompting Murphy to maintain an Underperform rating.
Looking ahead to the fiscal year 2024, Sonic’s outlook appears to be somewhat bleak, with anticipated lower earnings in the Franchised Dealership segment only partially offset by improvements in Powersport and EchoPark. Moreover, Sonic’s expectations for modest growth in new and used vehicle volumes, fixed operations, and F&I gross profit all contribute to a projected mid-single digit gross profit decline. Additional concerns include an increase in SG&A expenses relative to gross profit and rising floor plan interest costs. These projections, combined with mixed results in gross margins and gross profit per unit, underscore the rationale behind Murphy’s Sell rating for Sonic Automotive’s stock.
In another report released yesterday, CFRA also maintained a Sell rating on the stock with a $45.00 price target.
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Sonic Automotive (SAH) Company Description:
Sonic Automotive, Inc. operates as a automotive retailer. Its services include sales of both new and used cars and light trucks, sales of replacement parts and performance of vehicle maintenance, warranty, paint and repair services and arrangement of extended service contracts, financing, insurance, vehicle protection products and other aftermarket products for automotive customers. The company operates through the following segments: Franchised Dealerships and EchoPark. The Franchised Dealerships segment provides comprehensive services, which include sales of both new and used cars and light trucks, sales of replacement parts and performance of vehicle maintenance, manufacturer warranty repairs, and paint and collision repair services. The EchoPark segment sales used cars and light trucks. Sonic Automotive was founded by Ollen Bruton Smith and Bryan Scott Smith in January 1997 and is headquartered in Charlotte, NC.
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