Why Sonic (SONC) Stock Is Gaining After-Hours Monday

NEW YORK (TheStreet) -- Sonic (SONC) was gaining 3.3% to $23.37 after-hours Monday after beating analysts' expectations for earnings and revenue in the fiscal third quarter.

For the fiscal third quarter Sonic reported earnings of 30 cents a share, beating analysts' estimates of 29 cents a share by 1 cent. Revenue grew 3.8% from the year-ago quarter to $152.18 million. Analysts surveyed by Thompson Reuters expected revenue of $148.55 million for the quarter.

"Same-store sales for the quarter were especially strong, driven by our innovative product news, layered day-part promotional strategy and increased media efficiency. The multiple initiatives we have in place to increase sales, profits and new drive-in development are working together nicely to optimize shareholder value," Sonic CEO Clifford Hudson said in a press release. Same-store sales grew 5.3% in the quarter.

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TheStreet Ratings team rates SONIC CORP as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate SONIC CORP (SONC) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share, increase in net income, notable return on equity and good cash flow from operations. We feel these strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 51.41% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, SONC should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • SONIC CORP has improved earnings per share by 16.7% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, SONIC CORP increased its bottom line by earning $0.64 versus $0.61 in the prior year. This year, the market expects an improvement in earnings ($0.83 versus $0.64).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the Hotels, Restaurants & Leisure industry average, but is less than that of the S&P 500. The net income increased by 14.8% when compared to the same quarter one year prior, going from $3.58 million to $4.11 million.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market, SONIC CORP's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has slightly increased to $7.86 million or 9.35% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -3.05%.
  • You can view the full analysis from the report here: SONC Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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