What: Shares of fast-food burger chain Sonic Corp. (NASDAQ: SONC) dipped 13% last month, according to data from S&P Global Market Intelligence, as the company gave a mid-month sales warning.
So what: Sonic shares fell 8.6% on May 18 after the company said it expected comparable sales for the fiscal third quarter to be positive, but below its full-year forecast of 4%-6%. The company noted "slower industry traffic and modestly unfavorable weather during the quarter."
Sonic also maintained its full-year EPS forecast of 20%-25% growth. Earlier in the month, shares dipped 2.5% when Stephens Inc. cut its forecast for the drive-in chain, lowering its same-store sales forecast to 4.5% from 5.5%. Those fears were confirmed when Sonic said comps sales growth was slower than expected.
Now what: Sonic is set to report third-quarter earnings later this month, with analysts projecting a profit of $0.42 per share, up from $0.36 per share. There may be evidence the fast-food price war is taking its toll on Sonic, as the company recently introduced a $5 Sonic Boom Box to compete with recent offers from rivals such as Wendy's and Burger King.
Sonic has been one of the best-performing companies in the restaurant industry. Shares are up 300% from 2012 levels, and it's delivered consistent comparable sales and earnings growth. If the company can follow through on its full-year guidance, the recent drop looks like a buying opportunity since shares now trade at a price-to-earnings ratio of just 22, less than peers McDonald's or Burger King parent Restaurant Brands International.