Sonic Analyst Roundup Following Q1 Results

Sonic Corporation SONC beat Q1 expectations Tuesday and surged in after hours trading. Shares of the company traded at $29.43 on Wednesday, up 8.64 percent.

Below are highlights from analyst comments following the results along with current ratings and price targets.

Barclays - Underweight, $23 price target

“We continue to believe SONC a differentiated brand in a crowded QSR segment. With that said, within our relative rating system, we expect SONC to underperform, with strength priced-in...F15 Outlook: All components of guidance were reiterated, though now culminating in EPS growth "at the high end of slightly above" LT guidance for 14-20 percent, relative to the prior 18-20 percent. Revenue drivers include LSD comp (despite ~8 percent in 1QF15 and with co-op to outpace franchises with POS/POPS roll out) and the addition of 50-60 gross new units (sub-1 percent net). With continued fixed cost leverage, partially offset by MSD food basket inflation, guidance is for 50-100bp of restaurant margin expansion.”

Stifel - Hold, $29 price target

“EPS of $0.18 easily beat cons of $0.16, as SSS of 8.5% surprised. Much of the upside is a reflection of SONC's strong core business, effective LTOs and easy compares, but we think the tailwind from falling gas prices is hard to ignore & will continue to be a benefit for others in the industry in coming months. Although valuation keeps us at Hold on SONC, we are impressed by this nimble, differentiated business that clearly has a recipe for success in QSR.”

Oppenheimer - Outperform, $32 price target

“SONC's best quarterly comp in nearly ten years (+8.5 percent) highlights the power of external and internal tailwinds on its low $1.1M sales-per-unit. SSS were heavily traffic driven, but are yet to fully benefit from new technological drivers. Management's EPS outlook was slightly increased but still appears conservative given low single-digit comp assumptions and 1Q's ~40 percent increase...lower gas prices and employment/wage growth continue to supplement internal drivers such as better marketing, new products and updated technology initiatives—the effects of which should only intensify. Company-owned comps should now trend above franchisees, and we remain confident in above-average trends.”

Wunderlich - Buy, $33 price target

“We believe Sonic's unique drive-in experience, quality menu offerings, and differentiated messaging continues to resonate with consumers, gaining share from its larger QSR peers. With its operating results continuing to dramatically outperform its peers, we believe SONC should trade at a more premium valuation. SONC was recently at 11.4x our CY15 EV/EBITDA vs. its slower growing fast food peer avg. at 12.8x. Factoring a 13.0x multiple to our revised CY16,we are raising our PT to $33 from $28 and reiterate our Buy rating.”