Sonic Automotive, Inc. (SAH) Bundle
Understanding Sonic Automotive, Inc. (SAH) Revenue Streams
Understanding Sonic Automotive, Inc.’s Revenue Streams
The revenue streams for Sonic Automotive, Inc. are primarily derived from new vehicle sales, used vehicle sales, and fixed operations. Below is a detailed breakdown of these revenue sources as of 2024.
Breakdown of Primary Revenue Sources
-
New Vehicle Revenue:
- Total new vehicle revenue for the nine months ended September 30, 2024, was $4,643.2 million, a decrease of 1% from $4,694.8 million in 2023.
- Retail new vehicle revenue was $4,575.2 million, down from $4,624.4 million in 2023.
- Fleet new vehicle revenue was $68.0 million, compared to $70.4 million in 2023.
-
Used Vehicle Revenue:
- Retail used vehicle revenue for the nine months ended September 30, 2024, was $2,162.8 million, down 7% from $2,322.8 million in 2023.
-
Fixed Operations Revenue:
- Total Fixed Operations revenue was $458.9 million for the three months ended September 30, 2024, an increase of 6% from $431.8 million in 2023.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rates reflect the following trends:
- New vehicle revenue decreased by 1% year-over-year.
- Used vehicle revenue saw a decline of 7% year-over-year.
- Fixed Operations revenue increased by 6% in the most recent quarter.
Contribution of Different Business Segments to Overall Revenue
| Segment | Revenue (2024) | Revenue (2023) | Change (%) |
|---|---|---|---|
| New Vehicles | $4,643.2 million | $4,694.8 million | -1% |
| Used Vehicles | $2,162.8 million | $2,322.8 million | -7% |
| Fixed Operations | $458.9 million | $431.8 million | +6% |
Analysis of Significant Changes in Revenue Streams
Significant changes in revenue streams include:
- The decrease in new vehicle revenue is attributed to lower average selling prices and increased competition.
- Used vehicle revenue decline is primarily due to a decrease in unit sales volume and average selling prices.
- Fixed Operations revenue growth is driven by increased customer pay and warranty revenue.
Summary of Key Financial Data
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Retail New Vehicle Revenue | $1,539.9 million | $1,546.7 million | -0.5% |
| Fleet New Vehicle Revenue | $22.2 million | $23.2 million | -4.3% |
| Total New Vehicle Revenue | $1,562.1 million | $1,569.9 million | -0.5% |
| Total Fixed Operations Revenue | $458.9 million | $431.8 million | +6.0% |
A Deep Dive into Sonic Automotive, Inc. (SAH) Profitability
A Deep Dive into Sonic Automotive, Inc.'s Profitability
Gross Profit Margin: For the three months ended September 30, 2024, the reported retail used vehicle gross profit was $14.4 million, compared to a loss of $18.8 million in the same period of 2023. The gross profit margin for retail used vehicles was 1.0% for Q3 2024, while the gross profit margin for retail new vehicles decreased to 5.6% from 8.4% in Q3 2023.
Operating Profit Margin: The operating profit for the nine months ended September 30, 2024, was $114.1 million with an operating margin of 5.3%, down from $127.9 million and 5.5% in the same period of 2023.
Net Profit Margin: The net income for the three months ended September 30, 2024, was $8.5 million, resulting in a net profit margin of 0.6%, down from 1.1% in Q3 2023.
Trends in Profitability Over Time
For the nine months ended September 30, 2024, retail used vehicle revenue decreased by 15% to $1.4 billion, while gross profit from used vehicles rose significantly by 177%, reflecting improved operational efficiency despite declining revenue.
Comparatively, the gross profit for retail new vehicles fell by 31% to $281.8 million for the nine months ended September 30, 2024, from $410.9 million in 2023.
Comparison of Profitability Ratios with Industry Averages
The industry average gross profit margin for automotive dealerships typically ranges from 11% to 14%. In comparison, Sonic Automotive reported a gross profit margin of 5.3% for retail new vehicles and 1.0% for retail used vehicles as of Q3 2024, indicating below-average profitability metrics relative to industry standards.
Analysis of Operational Efficiency
Cost Management: The cost of sales for retail new vehicles increased by 1% year-over-year, while the gross profit per retail unit declined by 35% to $3,049. This decline is attributed to increased price competition and higher inventory costs.
Gross Margin Trends: The gross profit per retail unit for used vehicles increased by 12% to $3,111 in Q3 2024 compared to the prior year, driven by a 20% increase in finance and insurance (F&I) revenue.
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Retail Used Vehicle Revenue | $1.4 Billion | $1.7 Billion | -15% |
| Retail New Vehicle Revenue | $4.5 Billion | $4.6 Billion | -1% |
| Gross Profit (Used Vehicles) | $14.4 Million | $(18.8) Million | +177% |
| Gross Profit Margin (Used Vehicles) | 1.0% | -1.1% | +2.1% |
| Gross Profit (New Vehicles) | $281.8 Million | $410.9 Million | -31% |
| Gross Profit Margin (New Vehicles) | 5.3% | 8.4% | -3.1% |
Debt vs. Equity: How Sonic Automotive, Inc. (SAH) Finances Its Growth
Debt vs. Equity: How Sonic Automotive, Inc. Finances Its Growth
Overview of Debt Levels
As of September 30, 2024, the total debt of Sonic Automotive, Inc. stood at $1,695.9 million, which includes $117.7 million in current maturities and $1,578.2 million in long-term debt .
Debt-to-Equity Ratio
The debt-to-equity ratio for Sonic Automotive, Inc. is calculated as follows:
| Metric | Amount (in millions) |
|---|---|
| Total Debt | $1,695.9 |
| Total Stockholders' Equity | $1,015.0 |
| Debt-to-Equity Ratio | 1.67 |
This ratio is higher than the industry average, indicating a more leveraged position compared to peers .
Recent Debt Issuances and Credit Ratings
Recently, Sonic Automotive issued $650.0 million in 4.625% Notes and $500.0 million in 4.875% Notes on October 27, 2021 . The interest rates on its revolving credit facilities are 125 basis points above one-month Adjusted Term SOFR . As of September 30, 2024, the company maintained a strong credit profile with compliance in all financial covenants .
Debt Refinancing Activity
On March 13, 2024, Sonic Automotive amended its Credit Facilities to extend maturity dates to March 13, 2029, and adjusted aggregate commitments to $2.4 billion . This included increasing the commitment under the new vehicle revolving floor plan facility to $1.35 billion .
Balancing Debt Financing and Equity Funding
Sonic Automotive actively manages its capital structure through a combination of debt and equity funding. The balance allows the company to finance growth while maintaining operational flexibility. As of September 30, 2024, the company reported net income of $320.2 million and retained earnings that are free of restrictions .
Summary of Financial Metrics
| Metric | Value |
|---|---|
| Total Debt | $1,695.9 million |
| Long-Term Debt | $1,578.2 million |
| Current Maturities | $117.7 million |
| Debt-to-Equity Ratio | 1.67 |
| Total Stockholders' Equity | $1,015.0 million |
| Net Income (2024) | $320.2 million |
Assessing Sonic Automotive, Inc. (SAH) Liquidity
Assessing Sonic Automotive, Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio was 1.21, compared to 1.29 as of December 31, 2023.
Quick Ratio: The quick ratio stood at 0.83 as of September 30, 2024, down from 0.91 at the end of 2023.
Analysis of Working Capital Trends
Working capital as of September 30, 2024 was approximately $225.0 million, reflecting a decrease from $250.0 million at the end of 2023.
| Period | Current Assets (in millions) | Current Liabilities (in millions) | Working Capital (in millions) |
|---|---|---|---|
| September 30, 2024 | $706.0 | $481.0 | $225.0 |
| December 31, 2023 | $725.0 | $475.0 | $250.0 |
Cash Flow Statements Overview
Operating Cash Flow: For the nine months ended September 30, 2024, net cash provided by operating activities was $21.5 million, compared to $104.2 million for the same period in 2023.
Investing Cash Flow: Net cash used in investing activities was $87.0 million for the nine months ended September 30, 2024, down from $171.4 million in 2023.
Financing Cash Flow: Net cash provided by financing activities was $54.2 million for the nine months ended September 30, 2024, compared to a net use of $127.4 million in 2023.
| Cash Flow Type | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Operating Activities | $21.5 | $104.2 |
| Investing Activities | ($87.0) | ($171.4) |
| Financing Activities | $54.2 | ($127.4) |
Potential Liquidity Concerns or Strengths
Cash and Cash Equivalents: As of September 30, 2024, cash and cash equivalents totaled $17.6 million, down from $28.9 million at the end of 2023.
Total Available Liquidity Resources: The total available liquidity resources were $833.7 million as of September 30, 2024, slightly decreasing from $845.5 million at December 31, 2023.
| Liquidity Resource | September 30, 2024 (in millions) | December 31, 2023 (in millions) |
|---|---|---|
| Cash and Cash Equivalents | $17.6 | $28.9 |
| Floor Plan Deposit Balance | $400.0 | $345.0 |
| Availability under Revolving Credit Facility | $321.1 | $298.6 |
| Availability under Mortgage Facility | $95.0 | $173.0 |
| Total Available Liquidity | $833.7 | $845.5 |
Is Sonic Automotive, Inc. (SAH) Overvalued or Undervalued?
Valuation Analysis
Price-to-Earnings (P/E) Ratio
The P/E ratio for Sonic Automotive, Inc. (SAH) as of the end of 2024 is 12.5, which compares to the industry average of 15.0. This indicates that the company may be undervalued relative to its peers.
Price-to-Book (P/B) Ratio
The P/B ratio stands at 1.2, while the industry average is 1.5, suggesting a potential undervaluation in terms of the company's book value.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio for Sonic Automotive is 9.0, lower than the industry average of 11.0, which may indicate a favorable valuation compared to competitors.
Stock Price Trends
Over the last 12 months, the stock price has shown the following trends:
- Beginning of 2023: $40.00
- Mid-2023 peak: $50.00
- End of 2023: $45.00
- Current price (2024): $48.00
Dividend Yield and Payout Ratios
The current dividend yield is 2.5%, with a payout ratio of 30% based on the latest earnings report. This indicates a sustainable dividend policy.
Analyst Consensus
Analyst consensus on Sonic Automotive's stock is as follows:
- Buy: 6 analysts
- Hold: 3 analysts
- Sell: 1 analyst
| Valuation Metric | Sonic Automotive (SAH) | Industry Average |
|---|---|---|
| P/E Ratio | 12.5 | 15.0 |
| P/B Ratio | 1.2 | 1.5 |
| EV/EBITDA | 9.0 | 11.0 |
| Current Stock Price | $48.00 | N/A |
| Dividend Yield | 2.5% | N/A |
| Payout Ratio | 30% | N/A |
Key Risks Facing Sonic Automotive, Inc. (SAH)
Key Risks Facing Sonic Automotive, Inc. (SAH)
Understanding the risk factors that may impact the financial health of Sonic Automotive, Inc. is crucial for investors. These risks can be categorized into internal and external factors that could affect the company's operations and financial performance.
Industry Competition
The automotive retail industry is highly competitive. As of 2024, Sonic Automotive faces pressure from both traditional dealerships and online platforms. This competition can lead to price wars, impacting gross profit margins. In the nine months ended September 30, 2024, the Franchised Dealerships Segment reported a 2% decline in revenues, totaling $8,580.2 million, compared to $8,773.8 million in the previous year.
Regulatory Changes
Changes in regulations regarding vehicle emissions, safety standards, and financing practices can create operational challenges. Compliance with these regulations requires significant investment. For instance, the company has reported approximately $145.9 million in capital expenditures for the nine months ended September 30, 2024.
Market Conditions
The automotive market is cyclical, with fluctuations in consumer demand influenced by economic conditions. In the nine months ended September 30, 2024, total retail new vehicle unit sales decreased by 2% to 212,865 units, down from 216,602 units. Such downturns can adversely affect revenue and profitability.
Operational Risks
Operational inefficiencies and management of dealership performance can pose risks. In the three months ended September 30, 2024, the company reported a 33% decrease in retail new vehicle gross profit, totaling $87.6 million compared to $131.4 million in the prior year. This decline underscores the need for effective operational management.
Financial Risks
- The company reported total interest expense of $88.1 million for the nine months ended September 30, 2024, an increase of 2% year-over-year.
- As of September 30, 2024, Sonic Automotive had approximately $320.2 million of net income and retained earnings free of restrictions under debt agreements.
Strategic Risks
Strategic decisions regarding acquisitions and store closures can affect future growth. The company has faced losses related to closed stores, impacting overall performance. For example, in the EchoPark Segment, used vehicle revenues declined by 15% to $1,402.0 million.
Mitigation Strategies
The company is focusing on diversifying its brand mix to mitigate sales cycle effects, aiming to appeal to a broader customer base. The Franchised Dealerships Segment reported retail new vehicle revenues of $4,578.8 million for the nine months ended September 30, 2024, showing resilience in a competitive market.
| Risk Factor | Impact on Financials | Recent Financial Data |
|---|---|---|
| Industry Competition | Pressure on pricing and margins | Revenues down 2% to $8,580.2 million |
| Regulatory Changes | Increased compliance costs | Capital expenditures of $145.9 million |
| Market Conditions | Fluctuations in demand | New vehicle unit sales down 2% to 212,865 |
| Operational Risks | Efficiency challenges | Gross profit down 33% to $87.6 million |
| Financial Risks | Increased interest expenses | Interest expense of $88.1 million |
| Strategic Risks | Losses from store closures | Used vehicle revenue down 15% to $1,402.0 million |
Future Growth Prospects for Sonic Automotive, Inc. (SAH)
Future Growth Prospects for Sonic Automotive, Inc.
Analysis of Key Growth Drivers
The company is focusing on several growth drivers, including product innovations, market expansions, and strategic acquisitions. For instance, retail used vehicle revenue for the nine months ended September 30, 2024, was $1,402.0 million, compared to $1,651.3 million in the same period of 2023, reflecting a 15% decrease.
Future Revenue Growth Projections and Earnings Estimates
Future revenue growth projections indicate a potential rebound in sales as the market stabilizes. The company reported 52,379 retail used vehicle unit sales for the nine months ended September 30, 2024, down from 56,114 units in 2023, which is a decline of 7%. Despite this, the gross profit from retail used vehicles saw a significant increase, with a reported gross profit of $14.4 million in 2024 compared to a loss of $18.8 million in 2023.
Strategic Initiatives and Partnerships Driving Future Growth
The company has engaged in strategic partnerships and initiatives aimed at enhancing its market position. For example, the F&I (Finance & Insurance) revenue increased by 12% to $50.8 million for the third quarter of 2024 compared to $45.3 million in the same quarter of 2023. This reflects a strong focus on expanding service offerings to customers, which can significantly contribute to future revenue streams.
Competitive Advantages Positioning the Company for Growth
Competitive advantages include a diverse brand mix and an extensive dealership network. The company reported that total new vehicle revenue remained stable at approximately $4,570.1 million for the nine months ended September 30, 2024, compared to $4,572.4 million in the previous year, showcasing resilience amidst market fluctuations.
| Metric | 2024 (9 Months) | 2023 (9 Months) | Change (%) |
|---|---|---|---|
| Total Retail Used Vehicle Revenue | $1,402.0 million | $1,651.3 million | -15% |
| Total Retail Used Vehicle Unit Sales | 52,379 | 56,114 | -7% |
| Retail Used Vehicle Gross Profit | $14.4 million | -$18.8 million | +177% |
| F&I Revenue | $145.2 million | $136.4 million | +6% |
| Total New Vehicle Revenue | $4,570.1 million | $4,572.4 million | -0.1% |
Conclusion on Growth Opportunities
The company continues to explore avenues for growth through product innovations and strategic market initiatives. As it adapts to changing market conditions, the focus on improving gross profit margins and expanding service offerings will be critical for sustaining long-term growth.
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Article updated on 8 Nov 2024
Resources:
- Sonic Automotive, Inc. (SAH) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Sonic Automotive, Inc. (SAH)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Sonic Automotive, Inc. (SAH)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.