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

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.