Tipping six-month highs this morning, shares of drive-in restaurant chain Sonic (SONC 27.81 +0.24 +0.9%) trade near the middle of its daily range as action has calmed down into midday. The stock reacts favorably to the Q1 earnings beat announced last night after the bell.
Getting right into it, despite some adverse weather in the period SONC managed to register a system same-store sales decline of 1.7%, consisting of a 1.6% dip in same-store sales at franchise drive-ins and a 3.2% decline at company drive-ins. Management also noted the first three weeks of December saw improving SSS trends and the company noted current comps are around low single-digits. Excluding the impact of weather in the period, SONC management noted SSS were flat in Q1, indicating an improvement in underlying trends.
Further, the company was able to put up earnings of $0.30 per share on revenues which did miss market expectations on an 18.7% dip to $105.4 million.
Additionally, in spite of the adverse weather management was able to reiterate their full year 2018 outlook. They commented that while the macroeconomic environment may impact results, SONC continues to expect adjusted earnings per share for fiscal year 2018 to increase 5-10% year over year, excluding the impact of the recently passed federal tax legislation.
Management continues to see SSS flat to up 2% for the system on drive-in margins of 15.1-15.7%, depending upon the degree of SSS growth at company drive-ins. Capital expenditures are expected between $38-40 million, but excluding spending on build-to-suit drive-in development, capital outlays will amount to $34-36 million. The free cash flow expectation for the year is still $60-65 million and net interest expense should end the year at $32-34 million.
The move into midday can probably be linked to the run-up of the stock into the print. Shares of SONC were up about 24% into the report from September 2017 lows of $22.11.
SONC’s next appearance will be at the 20th annual ICR Conference on Monday, January 8.