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.
Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.