Core Insights - Auto retail ecosystem companies have shown strong performance year-to-date despite the announcement of auto tariffs and weakening industry fundamentals [1] - JPMorgan analyst Rajat Gupta has made several rating changes for key automotive stocks [1] Cars.com - JPMorgan upgraded Cars.com Inc (CARS) from Neutral to Overweight with a price target of $14 [2] - The company has made significant progress in developing new products that integrate into dealers' workflows, which is expected to help retain dealer customers [3] Sonic Automotive - Sonic Automotive Inc (SAH) was downgraded from Overweight to Underweight, with a price target increase from $65 to $72 [4] - Despite a strong luxury brand mix and exposure to key markets like California and Texas, Sonic has underperformed its peers and trades at a premium [4] Group 1 Automotive - Group 1 Automotive Inc (GPI) was downgraded from Overweight to Neutral, with a price target reduction from $435 to $415 [5] - The company's solid execution has been aided by favorable Texas exposure, but regional concentration increases volatility [5] Asbury Automotive Group - Asbury Automotive Group Inc (ABG) was downgraded from Neutral to Underweight, with a price target cut from $235 to $225 [5] - While the company is positioned for long-term growth through strategic acquisitions and digital investments, risks related to integration, execution, and elevated leverage are concerning [6]

Technical Analysis - Sonic Automotive, Inc. (SAH) has reached a key level of support, indicated by a "golden cross" where the 50-day simple moving average has crossed above the 200-day simple moving average [1] - A golden cross is a bullish technical chart pattern that suggests a potential breakout, typically involving the 50-day and 200-day moving averages [2] Market Performance - Over the past four weeks, shares of SAH have increased by 9.1%, indicating positive market momentum [4] - The company currently holds a 3 (Hold) rating on the Zacks Rank, suggesting it may be poised for further breakout [4] Earnings Expectations - There have been five upward revisions in earnings expectations for the current quarter, with no downward changes in the past 60 days, which supports the bullish outlook for SAH [4] - The Zacks Consensus Estimate for SAH has also moved higher, reinforcing investor confidence in the stock's upward trend [4] Investment Consideration - Given the significant technical indicator and the positive movement in earnings estimates, SAH is recommended for inclusion on investors' watchlists [6]

Company Overview - Sonic Automotive (SAH) is headquartered in Charlotte and operates in the Retail-Wholesale sector [3] - The stock has experienced a price change of 5.57% since the beginning of the year [3] Dividend Information - Sonic Automotive currently pays a dividend of $0.35 per share, resulting in a dividend yield of 2.09% [3] - This yield is significantly higher than the Automotive - Retail and Wholesale industry's yield of 0.23% and the S&P 500's yield of 1.57% [3] - The company's annualized dividend of $1.40 has increased by 12% from the previous year [4] - Over the last 5 years, Sonic Automotive has raised its dividend 4 times, averaging an annual increase of 35.72% [4] - The current payout ratio is 24%, indicating that the company pays out 24% of its trailing 12-month EPS as dividends [4] Earnings Growth - Earnings growth for Sonic Automotive appears strong, with the Zacks Consensus Estimate for 2025 at $6.43 per share, reflecting a 14.82% increase from the previous year [5] Investment Considerations - Dividends are favored by investors for various reasons, including improving stock investing profits and providing tax advantages [6] - High-yielding stocks may face challenges during periods of rising interest rates, but Sonic Automotive presents a compelling investment opportunity as a strong dividend play [7] - The stock currently holds a Zacks Rank of 3 (Hold) [7]

Company Overview - Sonic Automotive (SAH) is headquartered in Charlotte and operates in the Retail-Wholesale sector, with a year-to-date price change of -0.96% [3] - The company currently pays a dividend of $0.35 per share, resulting in a dividend yield of 2.23%, which is significantly higher than the Automotive - Retail and Wholesale industry's yield of 0.24% and the S&P 500's yield of 1.59% [3] Dividend Performance - Sonic Automotive's annualized dividend of $1.40 has increased by 12% from the previous year [4] - Over the past five years, the company has raised its dividend four times, achieving an average annual increase of 35.72% [4] - The current payout ratio stands at 24%, indicating that the company distributes 24% of its trailing 12-month earnings per share as dividends [4] Earnings Growth - The Zacks Consensus Estimate for Sonic Automotive's earnings in 2025 is projected at $6.28 per share, reflecting a year-over-year earnings growth rate of 12.14% [5] Investment Considerations - Sonic Automotive is considered a compelling investment opportunity due to its strong dividend profile and solid earnings growth potential [7] - The stock is currently rated with a Zacks Rank of 3 (Hold), indicating a neutral outlook [7]

Investment Rating - The report assigns an "Overweight" (OW) rating to General Motors (GM) and Ford, while Tesla and Rivian are rated "Underweight" (UW) [6][7]. Core Insights - The automotive industry is experiencing varied performance metrics across different companies, with GM and Ford showing potential upside in their stock prices, while Tesla and Rivian face significant downside risks [6][7]. - The report highlights the importance of valuation metrics such as EV/EBITDA, P/E ratios, and sales growth projections for assessing investment opportunities within the automotive sector [6][22]. Global Auto OEMs Investment Comparables - General Motors (GM) has a current price of $44.57 with a market cap of $43.067 billion and a target price of $53.00, indicating a 19% upside potential [6]. - Ford (F) is priced at $9.63 with a market cap of $38.294 billion and a target price of $11.00, representing a 14% upside [6]. - Ferrari (RACE) is valued at $439.97 with a target price of $460.00, showing a 5% upside [6]. - Tesla (TSLA) is currently priced at $241.37 with a target price of $120.00, indicating a -50% downside [6]. - Rivian (RIVN) has a price of $11.60 with a target price of $11.00, reflecting a -5% downside [6]. Global Auto Parts Suppliers Valuation Metrics - The average EV/EBITDA for US auto parts suppliers is projected at 1.8x for 2024, with a corresponding EBITDA margin of 12% [22]. - Aptiv (APTV) is rated "Overweight" with a current price of $51.71 and a target price of $102, indicating a 97% upside [22]. - Borg Warner (BWA) is rated "Overweight" with a price of $26.45 and a target price of $46, representing a 74% upside [22]. - Lear Corp (LEA) is rated "Overweight" with a price of $79.42 and a target price of $140, indicating a 76% upside [22]. Performance Metrics - The report indicates that the average revenue CAGR for US auto parts suppliers is projected to be 2% from 2023 to 2025 [74]. - The EBITDA margin for US auto parts suppliers is expected to be around 12% in 2025, with some companies showing higher margins [74][83]. - The report also highlights the financial returns of various suppliers, with some companies achieving significant returns on invested capital (ROIC) [54][56].

Financial Data and Key Metrics Changes - GAAP EPS was $2.04 per share, and adjusted EPS was $1.48 per share, a 9% increase year over year [6] - Consolidated total revenues reached a record of $3.1 billion, up 8% year over year, while consolidated gross profit grew 6% and adjusted EBITDA increased 7% [7][8] - Same-store new vehicle gross profit per unit (GPU) was $3,089, down sequentially from the fourth quarter [9] Business Line Data and Key Metrics Changes - Franchised dealership segment generated record franchise revenues of $3.1 billion, up 9% year over year, driven by an 11% increase in new retail volume and a 6% increase in fixed operations revenues [7][8] - EchoPark segment income was a record $10.3 million, with adjusted EBITDA at $15.8 million, up 116% year over year; EchoPark revenues were $560 million, flat year over year [11] - Power Sports segment generated record revenues of $34.4 million, with a gross profit of $8.5 million, and a segment adjusted EBITDA loss of $700,000 [14] Market Data and Key Metrics Changes - Same-store used vehicle volume decreased 2% year over year, driven by lower levels of late-model used vehicles and consumer affordability challenges [9] - EchoPark segment retail unit sales volume for the quarter was 18,800 units, up 5% year over year [12] Company Strategy and Development Direction - The company is focused on adapting to ongoing changes in the automotive retail environment and macroeconomic backdrop while making strategic decisions to maximize long-term returns [16] - The EchoPark business model is being strategically adjusted to position for disciplined long-term growth as used vehicle market conditions improve [13] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current tariff environment, indicating that the industry is resilient and can adapt to challenges [25][26] - The company is maintaining a disciplined balance sheet approach with $947 million in available liquidity, allowing for strategic capital deployment as market conditions evolve [15] Other Important Information - The Board of Directors approved a quarterly cash dividend of $0.35 per share, payable on July 15, 2025 [15] - The company has updated or withdrawn certain items in its previous financial guidance for 2025 due to uncertainties around tariffs [16] Q&A Session Summary Question: Impact of tariffs on factory partners and pricing - Management indicated that conversations with manufacturers suggest a potential stabilization in the next 90 days, with no significant price increases expected [25][26] Question: Update on fixed operations headcount - The company has hired 345 additional technicians, which has positively impacted fixed operations performance [33][34] Question: Used vehicle GPU trajectory - Management noted that margins seen in Q1 should hold throughout the year, with EchoPark's margins expected to improve due to a higher percentage of cars being sourced from the street [54][55] Question: Warranty work versus customer pay - Warranty work grew by 40% in Q1, while customer pay grew by only 2-3%, prompting management to adjust their focus to balance the mix better [67][68] Question: EchoPark's full-year guidance - Management explained that the conservative guidance is due to the uncertainty surrounding tariffs and their potential impact on used car pricing [112][113]

Financial Performance - Sonic Automotive's total revenues were $14.22 billion in FY 2024, a decrease of 1% year-over-year [9, 71] - GAAP EPS was $6.18 in FY 2024, compared to $4.97 in FY 2023, representing a 24% increase [9, 71] - Adjusted EBITDA was $560.1 million in FY 2024 [72] - In Q1 2025, total revenues reached $3.65 billion, an 8% increase year-over-year [9, 74] - Q1 2025 diluted earnings per share was $2.04, a 70% increase year-over-year [74] Segment Performance - Franchised Dealerships Segment revenues totaled $11.9 billion in FY 2024 [10] - EchoPark Segment revenues were $2.1 billion in FY 2024 [10] - Powersports Segment revenues reached $157 million in FY 2024 [10] - EchoPark Segment achieved an all-time record quarterly adjusted EBITDA in Q1 2025 [44] Strategic Focus and Outlook - The company anticipates new vehicle GPU in the $2,500 to $3,000 per unit range for FY 2025, depending on tariff impacts [57, 60] - Used vehicle GPU is expected to be in the $1,300 to $1,500 per unit range for FY 2025 [57, 60] - The company expects mid-single-digit percentage growth in fixed operations gross profit for FY 2025 [57, 60] - Sonic Automotive expects F&I GPU in the $2,400 per unit range for FY 2025 [57, 60]

Sales Performance - The U.S. retail automotive industry's total new vehicle seasonally adjusted annual rate of unit sales volume increased by 8% to approximately 16.6 million vehicles for the three months ended March 31, 2025, compared to approximately 15.4 million vehicles for the same period in 2024[94]. - Same store retail new vehicle revenue increased by 13% during the three months ended March 31, 2025, driven by a 10% increase in retail new vehicle unit sales volume and a 2% increase in average selling price[97]. - Retail new vehicle unit sales increased by 11% to 29,075 units, while total new vehicle unit sales also rose by 11% to 29,458 units[120]. - Total combined retail new and used vehicle unit sales increased by 5% to 73,892 units in Q1 2025, up from 70,198 units in Q1 2024[130]. - Retail used vehicle revenue increased by 1% to $1,225.0 million, with unit sales rising by 2% to 44,817 units[122]. - Retail used vehicle unit sales decreased by 2% to 25,019, while acquisitions and other factors contributed an additional 422 unit sales[137]. Revenue Growth - Same store retail used vehicle revenue increased by 1% during the three months ended March 31, 2025, driven by a 3% increase in average selling prices, despite a 2% decrease in sales volume[98]. - Same store Fixed Operations revenue increased by 5% during the three months ended March 31, 2025, primarily due to increased service capacity and higher parts and labor costs[99]. - Retail new vehicle revenue increased by 14% to $1,656.3 million, while fleet new vehicle revenue rose by 13% to $22.1 million, resulting in total new vehicle revenue of $1,678.4 million, a 14% increase[120]. - Total revenue for Fixed Operations increased by 6% to $474.4 million in Q1 2025, up from $446.7 million in Q1 2024[127]. - Total revenue for the Franchised Dealerships Segment increased by approximately $27.5 million, or 6%, reaching $467.4 million for the three months ended March 31, 2025, compared to $439.9 million in 2024[142]. Profitability Metrics - Retail new vehicle gross profit per unit decreased by $643, or 17%, to $3,089 per unit during the three months ended March 31, 2025, primarily due to increased price competition[97]. - Total gross profit per new retail unit decreased by 17% to $3,075, while total gross profit per new unit decreased by 17% to $3,054[120]. - Fixed Operations gross margin increased by 220 basis points to 49% during the three months ended March 31, 2025, driven by an increase in warranty revenue contribution[109]. - Total gross profit for Fixed Operations increased by 7% to $240.6 million in Q1 2025, compared to $223.9 million in Q1 2024[127]. - Gross profit as a percentage of total revenue improved to 50.7% in Q1 2025, compared to 50.1% in Q1 2024[127]. Financial Position - Total available liquidity resources as of March 31, 2025, were $946.9 million, up from $861.6 million as of December 31, 2024[190]. - Net cash provided by operating activities was approximately $195.8 million for the three months ended March 31, 2025, compared to $70.1 million for the same period in 2024[200]. - Net cash used in investing activities was approximately $35.5 million for the three months ended March 31, 2025, down from $39.4 million in the same period in 2024[204]. - The total net outstanding balance of variable rate debt was $1.9 billion as of March 31, 2025[217]. - A cash dividend of $0.35 per share was approved for all outstanding shares of Class A and Class B Common Stock, with a total of approximately $338.8 million of net income and retained earnings free of restrictions as of March 31, 2025[199]. Operational Efficiency - The company aims to optimize service capacity and customer retention to increase Fixed Operations revenues over the long term[126]. - Same store wholesale vehicle revenue increased by 12% to $54.0 million, but gross profit worsened by 400% to $(1.0) million[140]. - Fixed Operations same store gross profit increased by 7% to $234.3 million, reflecting improved operational efficiency[141]. - Warranty revenue saw a significant increase of 34%, rising to $86.4 million from $64.5 million year-over-year[127]. - The gross profit margin for warranty services improved by 290 basis points to 62.5%[142]. Market Conditions - The company anticipates continued volatility in wholesale vehicle pricing and related gross profit, expecting a return to long-term normalized levels[123]. - The first quarter historically contributes less operating profit than the second and third quarters, with the fourth quarter typically contributing the highest operating profit[209]. - The U.S. retail new vehicle SAAR increased by 11% to 14.0 million vehicles, while the total new vehicle SAAR increased by 8% to 16.6 million vehicles[119]. Expenses and Costs - Total SG&A expenses for the three months ended March 31, 2025, were $380.3 million, a decrease of 3% from $392.2 million in the same period of 2024[177]. - Compensation expenses increased to $258.5 million, up 5% from $247.3 million, while advertising expenses rose to $23.8 million, a 7% increase from $22.3 million[177]. - Other SG&A expenses decreased by 23% to $87.8 million from $113.3 million, primarily due to a $30.0 million benefit from cyber insurance proceeds[179]. - Depreciation and amortization expenses increased by approximately $3.4 million, or 9%, during the three months ended March 31, 2025[182]. - Interest expense for new vehicle floor plans increased by $0.6 million, while the average interest rate applied decreased, offsetting $3.4 million of the net increase[184].

Core Insights - Sonic Automotive reported revenue of $3.65 billion for the quarter ended March 2025, reflecting a year-over-year increase of 7.9% and surpassing the Zacks Consensus Estimate of $3.54 billion by 3.18% [1] - The company's EPS for the quarter was $1.48, an increase from $1.36 in the same quarter last year, also exceeding the consensus estimate of $1.46 by 1.37% [1] Financial Performance Metrics - The total combined retail new and used vehicle unit sales reported were 53,523, slightly below the average estimate of 53,850 [4] - Used vehicle unit sales were reported at 25,441, which was lower than the estimated 26,604 [4] - Retail new vehicle sales in the Powersports segment were 850, compared to the average estimate of 1,017 [4] - EchoPark segment reported used vehicle unit sales of 18,798, slightly above the average estimate of 18,487 [4] Revenue Breakdown - Total vehicle revenues reached $2.99 billion, exceeding the average estimate of $2.83 billion, marking a year-over-year increase of 7.9% [4] - Revenues from used vehicles were reported at $1.23 billion, matching the average estimate [4] - New vehicle revenues were $1.68 billion, surpassing the average estimate of $1.52 billion [4] - Finance, insurance, and other net revenues were $190.80 million, exceeding the average estimate of $182.19 million [4] - Parts, service, and collision repair revenues were $474.40 million, slightly below the average estimate of $480.08 million [4] - Powersports revenues were reported at $34.40 million, above the average estimate of $32.08 million, representing a year-over-year increase of 24.2% [4] - New vehicle fleet revenues were $22.10 million, exceeding the average estimate of $16.47 million, with a year-over-year increase of 12.8% [4] Stock Performance - Sonic Automotive's shares have returned -4.5% over the past month, compared to the Zacks S&P 500 composite's -5.1% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market in the near term [3]

Financial Data and Key Metrics Changes - GAAP EPS was $2.04 per share, and adjusted EPS was $1.48 per share, a 9% increase year over year [5] - First quarter consolidated total revenues were a record $3.1 billion, up 8% year over year, while consolidated gross profit grew 6% and adjusted EBITDA increased 7% [6][11] Business Segment Data and Key Metrics Changes - Franchised dealership segment revenues reached $3.1 billion, up 9% year over year, driven by an 11% increase in new retail volume and a 6% increase in fixed operations revenues [6] - EchoPark segment income was a record $10.3 million, with adjusted EBITDA at $15.8 million, up 116% year over year [8] - EchoPark revenues were $560 million, flat year over year, but gross profit increased 21% to $64 million [9] - Power Sports segment generated record revenues of $34.4 million, with a gross profit of $8.5 million, and an adjusted EBITDA loss of $700,000 [10] Market Data and Key Metrics Changes - Same store new vehicle gross profit per unit (GPU) was $3,089, down sequentially from the fourth quarter [7] - Same store used vehicle volume decreased 2% year over year, while same store used GPU increased sequentially to $15.55 per unit [7] - Parts and service gross profit increased by 7% in the first quarter [8] Company Strategy and Development Direction - The company is focused on maintaining strong relationships with teammates, manufacturers, and customers as key to future success [5] - A data-driven centralized inventory management strategy for EchoPark is seen as a key differentiator to minimize market volatility disruptions [10] - The company plans to adapt to ongoing changes in the automotive retail environment while making strategic decisions to maximize long-term returns [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating tariff impacts and believes that the automotive industry can handle price adjustments without significant concerns [17][20] - The company is focused on executing its operational playbooks and processes, expecting solid results in the upcoming quarters [18][19] - Management acknowledged the need to balance warranty and customer pay work in service operations to improve revenue mix [50][51] Other Important Information - The company ended the quarter with $947 million in available liquidity, including $430 million in cash and floor plan deposits [11] - A quarterly cash dividend of $0.35 per share was approved, payable on July 15, 2025 [11] Q&A Session Summary Question: Commentary on tariffs and their impact - Management indicated that manufacturers are uncertain about the tariff impacts, but they expect things to stabilize in the next 90 days [17] - The company is not concerned about significant price increases and believes they can navigate through the situation [19] Question: Update on fixed operations hiring - Management reported hiring 345 additional technicians, which has positively impacted fixed operations [23][24] - There is ongoing focus on increasing technician headcount to meet service demand [26] Question: Used vehicle GPU trajectory - Management stated that GPU margins should hold steady if market conditions remain stable, with EchoPark's margins improving due to increased street purchases [38][39] Question: Warranty work versus customer pay - Warranty work grew by 40% in the first quarter, while customer pay grew by only 2-3%, indicating a need to adjust the revenue mix [47][50] Question: EchoPark's full-year guidance - Management explained that guidance was conservative due to potential tariff impacts, but they are prepared to adjust as conditions evolve [77][78] Question: SG&A expenses - Management noted that first-quarter SG&A expenses were influenced by one-time compensation costs, but overall expenses are in line with expectations [82][84]