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1. Company Snapshot

1.a. Company Description

Sonic Automotive, Inc.operates as an automotive retailer in the United States.It operates in two segments, Franchised Dealerships and EchoPark.


The Franchised Dealerships segment is involved in the sale of new and used cars and light trucks, and replacement parts; provision of vehicle maintenance, manufacturer warranty repair, and paint and collision repair services; and arrangement of extended warranties, service contracts, financing, insurance, and other aftermarket products for its guests.The EchoPark segment sells used cars and light trucks; and arranges finance and insurance product sales for its guests in pre-owned vehicle specialty retail locations.As of December 31, 2021, the company operated 140 new vehicle franchises representing 28 brands of cars and light trucks; 17 collision repair centers in 17 states; and 46 EchoPark stores in 16 states, including 11 Northwest Motorsport pre-owned vehicle stores.


Sonic Automotive, Inc.was incorporated in 1997 and is based in Charlotte, North Carolina.

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1.b. Last Insights on SAH

Sonic Automotive's recent performance was driven by its strong portfolio, geographical footprint, and Net 300 Initiative, which offer momentum to weather affordability concerns. The company's Franchised Dealerships segment showed slight revenue contraction but higher same-store retail new vehicle sales. Additionally, Sonic Automotive's management expects market normalization and better pricing post-2025 for its EchoPark segment. The company also hiked its payout, which is a positive event for shareholders.

1.c. Company Highlights

2. Sonic Automotive's Q4 2025 Earnings: A Resilient Performance Amidst Industry Headwinds

Sonic Automotive reported a mixed bag in its fourth quarter 2025 earnings, with consolidated total revenues declining 1% year-over-year to $3.9 billion, while adjusted EPS grew 1% to $1.52 per share, slightly missing the estimated $1.53. The company's franchise dealership segment faced headwinds, with same-store revenues down 5%, primarily due to pull-forward consumer demand for electric vehicles. However, the EchoPark segment shone bright, with adjusted segment income surging 300% year-over-year to a record $3.6 million, and adjusted EBITDA reaching $8.8 million, up 110% year-over-year.

Publication Date: Mar -03

📋 Highlights
  • EchoPark Segment Growth:: Adjusted EBITDA surged to $49.2M for the full year 2025, up 78% YoY, with Q4 alone hitting $8.8M (110% YoY growth).
  • Powersports Momentum:: Q4 revenue reached $36M (+19% YoY) with gross profit at $9M (+25% YoY), reflecting strong performance in this segment.
  • Franchise Dealership Challenges:: Same-store revenue declined 5% YoY in Q4, impacted by pull-forward demand for electric vehicles and lower new vehicle volume.
  • Financial Resilience:: Consolidated gross profit hit a record $3.9B in Q4, growing 4% YoY despite a 1% revenue decline, showcasing operational efficiency.
  • Liquidity Position:: Ended Q4 with $702M in available liquidity, including $306M in cash and floor plan deposits, providing flexibility for strategic investments.

Segmental Performance

The EchoPark segment's strong performance was a highlight, driven by its focus on pre-owned vehicle retailing. The segment's adjusted EBITDA margin expansion was notable, reaching an all-time record $49.2 million for the full year, up 78% year-over-year. The Powersports segment also delivered a strong performance, with revenues and gross profit reaching record levels, up 19% and 25% year-over-year, respectively.

Operational Highlights

Sonic Automotive's management highlighted several operational successes, including achieving all-time record customer satisfaction scores for the third consecutive year and EchoPark retaining the highest guest satisfaction rating among pre-owned vehicle retailers. The company is investing in brand marketing for EchoPark in 2026, with a potential increase in advertising expense of $10 million to $20 million. As Frank Dyke noted, "We're building and investing in a digital retail solution that will include a launch of the EchoPark app and will be industry-leading once complete."

Valuation and Outlook

With a P/E Ratio of 17.5 and an EV/EBITDA multiple of 11.92, Sonic Automotive's valuation appears reasonable, considering its growth prospects. The company's guidance for high single-digit volume growth for EchoPark in 2026 and its plans to expand its store count suggest a positive outlook. Analysts estimate revenue growth at 4.5% for the next year. With a comfortable balance sheet leverage of 2.1, Sonic Automotive is poised to navigate the challenges in the automotive retail industry.

Margins and Profitability

The company's gross profit margins were a bright spot, with consolidated gross profit growing 4% year-over-year. The EchoPark segment's GPU is expected to be stronger in the first quarter of 2026, driven by tax return season. With a ROIC of 6.88% and an ROE of 11.15%, Sonic Automotive's profitability metrics are respectable, considering the industry's challenges. The company's focus on parts and services, with a goal to reach $100 million in fixed operations gross per month, is expected to drive future growth.

3. NewsRoom

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Automakers could start raising prices this year to offset tariffs, dealership executive says

Feb -24

Source: cnbc.com

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How to Approach Sonic Automotive Stock Post Q4 Earnings?

Feb -20

Source: zacks.com

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Paul Rusnak Acquires 18,738 Shares of Sonic Automotive (NYSE:SAH) Stock

Feb -20

Source: defenseworld.net

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Sonic Automotive Q4 Earnings Miss Expectations, Revenues Decline Y/Y

Feb -19

Source: zacks.com

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Sonic Automotive (NYSE:SAH) Shares Gap Down on Disappointing Earnings

Feb -19

Source: defenseworld.net

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Sonic Automotive, Inc. (SAH) Q4 2025 Earnings Call Transcript

Feb -19

Source: seekingalpha.com

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Sonic Automotive (SAH) Q4 Earnings: Taking a Look at Key Metrics Versus Estimates

Feb -18

Source: zacks.com

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Sonic Automotive (SAH) Q4 Earnings and Revenues Miss Estimates

Feb -18

Source: zacks.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (3.75%)

6. Segments

Franchised Dealerships

Expected Growth: 3.5%

Sonic Automotive's franchised dealerships growth of 3.5% is driven by increasing same-store sales, strategic brand mix, and geographic diversification. Additionally, investments in digital retailing and customer experience enhancements contribute to the growth. Furthermore, the company's focus on high-margin brands, such as luxury and import vehicles, also supports the growth momentum.

EchoPark

Expected Growth: 5.0%

EchoPark's 5.0% growth is driven by its unique business model, which combines online car buying with a nationwide network of delivery centers. Additionally, its focus on used cars, which are in high demand, and its ability to offer competitive pricing due to lower overhead costs, contribute to its growth. Furthermore, EchoPark's data-driven approach to inventory management and its strong brand recognition also support its growth momentum.

Powersports

Expected Growth: 3.0%

Powersports from Sonic Automotive, Inc. achieves 3.0% growth driven by increasing demand for outdoor recreational activities, expanding product offerings, and strategic partnerships. Additionally, the company's focus on e-commerce and digital marketing enhances customer engagement, contributing to sales growth. Furthermore, the rising popularity of electric vehicles and environmentally friendly options also supports the segment's growth.

7. Detailed Products

New Vehicles

Sonic Automotive, Inc. sells new vehicles from various manufacturers such as Chevrolet, Toyota, and Honda, among others.

Used Vehicles

The company offers a wide range of pre-owned vehicles, including certified pre-owned vehicles, at its dealerships.

Parts and Accessories

Sonic Automotive, Inc. sells genuine and aftermarket parts and accessories for various vehicle makes and models.

Service and Repair

The company offers vehicle maintenance and repair services, including routine maintenance, repairs, and warranty work.

Financing and Insurance

Sonic Automotive, Inc. provides financing and insurance options for vehicle purchases, including leasing and financing options.

Collision Repair

The company offers collision repair services, including paintless dent repair and auto body repair.

8. Sonic Automotive, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Sonic Automotive, Inc. faces moderate threat from substitutes, as customers have limited alternatives for purchasing and servicing vehicles.

Bargaining Power Of Customers

Sonic Automotive, Inc. has a large customer base, but individual customers have limited bargaining power due to the company's diversified revenue streams.

Bargaining Power Of Suppliers

Sonic Automotive, Inc. has a moderate level of bargaining power with its suppliers, as it relies on a few large suppliers for vehicles and parts.

Threat Of New Entrants

Sonic Automotive, Inc. operates in a highly competitive industry, but the threat of new entrants is low due to high barriers to entry, such as regulatory requirements and capital expenditures.

Intensity Of Rivalry

Sonic Automotive, Inc. operates in a highly competitive industry, with intense rivalry among dealerships and online platforms, leading to high marketing and advertising expenses.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 79.17%
Debt Cost 6.43%
Equity Weight 20.83%
Equity Cost 12.70%
WACC 7.74%
Leverage 380.02%

11. Quality Control: Sonic Automotive, Inc. passed 2 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

62.62$

Current Price

62.62$

Potential

-0.00%

Expected Cash-Flows