NEW YORK (TheStreet) -- Shares of Sonic (SONC) were slumping 5.79% to $25.85 in pre-market trading on Wednesday as the company provided weaker-than-expected preliminary results for the fiscal 2016 fourth quarter.
After yesterday's closing bell, the Oklahoma City-based company said it forecasts earnings to be in the range of 43 cents and 45 cents per share. Wall Street is looking for earnings of 48 cents per share.
The drive-in restaurant chain said system-wide same-store sales will decline approximately 2% during the fourth quarter.
As a result, Deutsche Bank reduced its price target to $27 from $33 this morning. The firm has a "hold" rating on Sonic.
Deutsche Bank said Sonic's fourth quarter results are a product of an industry-wide slump in traffic and consumer spending.
While Sonic has historically succeeded on its ability to offer unique products, Deutsche Bank said consumers seem to be more concerned about value instead of differentiation.
Additionally, Oppenheimer lowered Sonic's price target to $33 from $40.
The firm reiterated its "outperform" rating, saying that the negative comp results could serve as an "attractive entry point" because its lower-risk earnings model has "major padding."
Oppenheimer added that Sonic is a proven same-store sales outperformer with a unique pipeline of technology, marketing and product catalysts.
Elsewhere in the sector, Sham Gad of Real Money, our premium site for active traders, writes that investors should ignore downbeat analyst reports about trouble Chipotle Mexican Grill (CMG) - Get Report . "Not only do I believe that Chipotle will regain its customers again, but it will also regain new ones and start generating envy-stirring financial results," Gad writes. Click here to read his full analysis.
Separately, TheStreet Ratings objectively rated Sonic according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
The team rates Sonic as a Buy with a ratings score of B-. This is driven by some important positives, which it believes should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks the team covers. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and increase in stock price during the past year. We feel its strengths outweigh the fact that the company has had sub par growth in net income.
You can view the full analysis from the report here: SONC
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