Analyst Note| David Whiston, CFA, CPA, CFE |
We are not changing our fair value estimate after Sonic Automotive’s record first quarter. Diluted EPS from continuing operations of $1.23 beat the Refinitiv consensus of $0.92 and was a first-quarter record. Revenue rose 20.7% year over year to a record $2.8 billion and franchise dealer same-store revenue grew 16.4%, with only service holding growth back. Same-store franchise service revenue fell by 4.7% but we expect this segment to start recovering as soon as second quarter because maintenance can only be deferred for so long. Total franchised store new-vehicle volume rose 12.1%, while new-vehicle gross profit per unit rose by 36.4%. Sonic, like the other dealers we cover, is wisely seeking to maximize the profit on what new-vehicle inventory it has because the semiconductor shortage means discounting to maximize volume is pointless as dealers cannot quickly replenish inventory.