Sonic Automotive (SAH), a full service, brick and mortar, franchised car dealership, which sells new and used cars, warned about third quarter results that were impacted by Hurricanes Harvey and Irma yesterday afternoon. However, the company was able to reaffirm earnings guidance for the full year.
Nineteen stores, and twenty percent of Sonic's consolidated revenues for 1H17 were in the Houston market, which was hit by Hurricane Harvey, while another twenty-four stores are located in the Florida, Alabama, and Georgia markets, which were hit by Hurricane Irma. Sonic reported yesterday that all stores in these areas are now back up and running, but some are "limited" because of hurricane related damage.
SAH sees third quarter adjusted EPS of $0.39-0.41, which is down from $0.47 last year and below expectations, but the company did reaffirm full year adjusted EPS guidance of $1.85-1.95, citing a $0.04 and $0.14 storm related adjustment, respectively.
These weather-related setbacks have been an overall positive for the automotive industry as consumers in the affected areas have found it necessary to get rid of and purchase, or repair their cars following storm related damage. These positives have been apparent in the stock price trajectories of some major automotive manufacturers including General Motors (GM), Ford (F), Toyota (TM), which are up 24.8%, 14%, and 10%, respectively since the beginning of Harvey, on August 25th. With operations back up and running in the southern U.S. this might provide tailwinds in the upcoming quarters for SAH.
From a valuation standpoint, shares trade at 13.6x diluted earnings and estimates point to a reduction in adjusted EPS y/y, a revenue about flat y/y, and loss in ROE for fiscal year 2017. Lithia Motors (LAD), a close competitor, currently trades at 14.1x diluted earnings and estimates point to a sizable increase in adjusted EPS y/y, a sizable revenue increase y/y, and a slight increase in ROE to an all-time high fo the fiscal year 2017.