Sonic Finishes 2021 With a Record Quarter and Sees Good Times Ahead

Sonic ended 2021 with record fourth-quarter results and adjusted EPS of $2.66, up 77% year over year, which was well above the $1.85 Refinitiv consensus. We agree with management’s optimism on the call that the next few years could be excellent for the company if automakers can stay disciplined on inventory. Current levels are too low now, though, as lean used-vehicle inventory and high used pricing are pushing some used-vehicle customers into new, which are also in short supply because of the chip shortage. On Feb. 15 Sonic found out, to its surprise, that its February new vehicle inventory allocation from many automakers would be cut due to the chip shortage, but we agree with management that inventory will ebb and flow for a while and be better by the end of 2022.