Apparently, neither Paris Hilton's middle finger nor Nicole Richie's onion-ring bumbling could hold back Sonic Corp. (NASDAQ:SONC) last quarter. The drive-in burger joint released its first-quarter numbers last night after the bell, and the Q1 figures are a lot like the food: palatable, not too flashy, but snazzy enough to make you stop and check things out.
First, a Foolish disclosure: I've had a soft spot for Sonic's burgers and slushes ever since my wife introduced me to the place on one of our first dates. I'm a sucker for those art deco awnings, and being a red-blooded American, I'm pretty sure that food tastes better when eaten behind a steering wheel. Judging by last night's numbers, I'm not the only one with that opinion.
For the quarter ended Nov. 30, 2003, Sonic reported a respectable 20% increase in revenues and net income, fueling a 19% increase in earnings per share over the same period last year.
But the best news was the increase in comps. Same-store sales gained just under 6% at company-owned stores, and a bit more than that at franchises. The results beat the 3% growth that Sonic hoped for back in November, marking a turnaround from the anemic comps that have afflicted the business for the past year. That's an important improvement, because it's better (and cheaper) to grow by continuing to flip burgers on existing grills while also expanding and building new restaurants, than to rely on new-store growth alone.
Priced at about 23 times the 2004 estimates of $1.49, Sonic's shares are nowhere near as cheap as they were five months ago, when they dipped below $24. They look fully valued to me.
But given Sonic's opportunities for growth -- there are entire states that have yet to be introduced to delights like Fritos Chili Pies -- it still might seem like a better bargain than larger peers such as McDonald's (NYSE:MCD), Yum Brands (NYSE:YUM), and Wendy's (NYSE:WEN). While the larger firms all trade at lower earnings multiples, their expansion prospects aren't as tasty as Sonic's.
Got an opinion on the burger biz? Worried about an outbreak of what the Italians call mucca pazza? Discuss on the Fool's various fast-food boards: Sonic, McDonalds, YUM, and Wendy's.
Seth Jayson owns no shares of Sonic, but he's thinking of stopping by for a Cream Slush on the way home from work. He accepts Fritos, Chili Pies, and Cherry Limeades at [email protected].
