Sonic Shares Maintained Overweight Ahead Of Q1 Results

Stephens has maintained their Overweight rating on Monday for Sonic Corporation SONC ahead of Q1 results. We are maintaining our 1Q SSS growth estimate of +3.2 percent and FY16 SSS growth assumption of +2.8 percent, Stephens noted. "We believe Sonic could ultimately see upside to the higher end or above the Company's +2.0 percent to +4.0 percent guidance. Our research suggests that brand momentum remains robust amid what we see as overall rising tide in quick-service," the firm commented in their research brief. The firm made a slight adjustment to their previous 1Q franchise fees & royalties assumption. "We are reassessing our inclusion of one-time benefits the Company saw to this revenue stream in 1Q of FY15 as multiple franchisees re-signed their agreements. We maintain our OW rating and $34 price target," Stephens commented. Momentum Remains Strong Sonic is being seen by the firm as well-positioned to capitalize on a growing consumer preference for value and lower-end differentiation. According to Stephens, the combination of SONC's unique dining occasion, which lends itself to a higher frequency of attachment, and the Company's proven ability to generate compelling menu promotions/LTOs will result in outsized SSS growth for the foreseeable future. The company's shares rose higher by 1.18 percent during the past week but lost 6.29 percent on a 4-week basis. "We also look for the Company to easily show positive SSS growth in the coming quarters, despite a difficult upcoming comparison of +8.5% from 1Q15 and +11.5% from 2Q15," noted Stephens. In the past 52 weeks, Sonic's shares have dropped 15.67 percent.