It seems in retrospect that I spent about half my time in college frequenting our local Sonic (Nasdaq: SONC) drive-in restaurant. I now live in a city that is "Sonicless," and I'd be less than candid if I didn't confess to missing some of the items on the chain's menus.
In addition to its tasty fare, Sonic turned out relatively good results for its quarter ended Feb. 28. While income declined to $6.2 million, or $0.09 per share, from $12.9 million, or $0.14 a share, without charges for debt extinguishments and a tender offer, among other special items, the most recent quarter would have generated earnings of $0.16 a share.
For the third quarter, Sonic's management is now guiding to per-share earnings of $0.30 to $0.31 a share on revenue growth of 10% to 12% year over year. Expectations apparently had been for revenue growth below 10%, leading to earnings of about $0.30 a share.
In announcing his company's results, Sonic Chairman, President, and CEO Clifford Hudson said, "Second quarter results reflected continued strength in our business and operating results, especially considering the harsh weather conditions we encountered across many of our markets. Despite the weather's impact in January, which restrained overall same-store sales growth for the quarter and temporarily delayed some drive-in openings, it was good to see same-store sales above the upper end of our 2% to 4% long-term target range..."
Oklahoma City-based Sonic, which may lead the world in ginning out superb onion rings, continues on a path of concerted improvements to its stores. In the most recent quarter, the company retrofitted 41 of its partner drive-ins. Its plans for this year call for the retrofitting of about 150 of its partner drive-ins and 250-300 franchise drive-ins. It also plans to open up to 55 new drive-ins this quarter, of which about 80% would be franchise units.
So Sonic's quarterly results were not as stellar as those of Jack in the Box (NYSE: JBX) or McDonald's (NYSE: MCD), but were stronger than Wendy's (NYSE: WEN). At the same time, on a forward P/E basis, it trades about in line with Wendy's and Jack in the Box, but at a slight premium to McDonald's.
And of the four companies it sports the most attractive ratio of P/E to expected five-year growth, with a number approaching 1.25 (versus above 2.0 readings for McDonald's and Wendy's, and 1.7 for Jack in the Box). On these bases, I'd urge Fools with a taste for interesting companies to at least keep Sonic prominently displayed on their watch lists.
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Fool contributor David Lee Smith does own shares of McDonald's, but not the other companies mentioned. He welcomes your questions or comments. The Fool has a disclosure policy.
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