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Sonic's Solid Q3 A Testament To Its Return To Core Strengths

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Sonic's Solid Q3 A Testament To Its Return To Core Strengths
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While Sonic Corporation (NASDAQ: SONC) did not beat on Q3 earnings, Stephens analyst Will Slabaugh believes Sonic closed in on its valuation gap. The analyst maintains an Overweight rating with a $32 price target.

Numbers You Should Know From Q3 Earnings

  • Same-Store Sales: -1.2 percent versus -1.0 percent consensus.
  • Adjusted EPS: $0.43 versus $0.41 consensus.
  • Guidance for Same Store Sales: -2.5 percent (previously was -2.0 percent to flat).

More Sonic quarterly figures are available on Benzinga Pro.

“We credit the improvement to Sonic’s return to messaging and offers around its core equities, though we believe the environment continues to be difficult for smaller QSRs that lack a large, media-backed value push,” Slabaugh noted.

Promotions Are Helping Drive Sonic

Limited-time offerings and promotions like Family Night and Real Ice Cream Slush have been able to offset some recent sales struggles.

“We see Sonic as a differentiated concept with the ability to compete with larger players by leverage its customer loyalty and improving technology. We continue to believe Sonic is moving in the right direction and, despite the likely negative 4Q, should begin to close the valuation gap vs. similarly franchised peers by the end of 4Q17,” Slabaugh stated.

Additionally, Slabaugh is expecting menu innovations and new technology rollouts, including a new mobile app next month, as key growth initiatives for Sonic’s top-line.

Going forward, Sonic should expect to expand on its margins, and Slabaugh sees the company beginning to see EPS outperformance.

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Image Credit: By Belinda Hankins Miller from U.S.A. [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0) or CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

Latest Ratings for SONC

DateFirmActionFromTo
Mar 2018Canaccord GenuityMaintainsHoldHold
Mar 2018Cowen & Co.MaintainsMarket PerformMarket Perform
Mar 2018BarclaysMaintainsUnderweightUnderweight

View More Analyst Ratings for SONC
View the Latest Analyst Ratings

Posted-In: Analyst Color Earnings Long Ideas News Guidance Reiteration Restaurants Analyst Ratings Best of Benzinga

 

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