Sonic's (NASDAQ:SONC) 2014 stock drop continued following its Q4 earnings call on Jan. 6. Its price per share has fallen from $20.19 on Jan. 1 to $19.25.  The fast food drive-in business has its work cut out for it, having to compete in a crowded space populated by such giants as Burger King Worldwide and Wendy's (NASDAQ:WEN). Here's what's behind the company's latest earnings report, and why the market wasn't crazy about it.

Missed the boat
Analysts were closely watching Sonic this go-around, expecting revenue for the quarter to be $128 million, with an EPS of $0.13 per share. Over the past five quarters, the fast food company has surpassed earnings per share expectations, although it has stumbled a couple of times on the revenue front.

For Q1 of 2014, Sonic again beat analyst estimates for EPS, clocking in at $0.14 per diluted share. Quarterly revenue, however, was just 0.5% higher than the same time last year, coming in at $126.6 million for the quarter. While that figure might have been stagnant, Sonic still had some positives to report. Overall same-store sales rose 2.2%, thanks to a boost in drive-in sales from franchise locations. It's good to see that kind of positive growth, but that number was also a little short compared to the 3% in same-store sales growth Sonic pulled in during the same time last year.

The cost of the commodity
One metric that practically every restaurant struggles with is the amount of money spent on the commodities to make its food products. Costs are constantly rising, but during its last quarter, competitor Wendy's saw Food and Paper take up 32.9% of its overall revenue, down slightly from 33.1% during the same time last year.

In Sonic's case, the drive-in company's food and packaging costs only took up 20.7% of its revenue this quarter, compared to 21.1% a year before. That upped the company's operating income from $17.2 million to $18.3 million, or 14% of overall sales, a slight improvement on Q1 2013's 13.6%. That Sonic is able to save money in this segment is impressive, given the company's tendency to rotate new menu items constantly. Those savings also appear to have trickled down into Sonic's raised net income of $8.2 million, especially when sized up next to last year's Q1 net income of $6.1 million.

How exactly was Sonic able to shave so much off its operating expenses this quarter? According to its quarterly conference call , through using a new supply chain management system that has helped lower its cost of inventory and given "greater transparency" to all aspects of the supply chain. Additionally, Sonic has begun using a point of sale (or POS) system that helps streamline its order process and minimize product waste. The company expects both these new tools to boost operating margins for the next several years.

Not-so tasty burger?
While revenue wasn't quite up to snuff for analysts for the quarter, that's no reason to dismiss Sonic as a weak fast-food company. Sales are still up compared to where they were a year ago, and operational costs are dropping, making for larger margins. Additionally, Sonic opened seven new franchise drive-ins over the quarter, an improvement on the sole location it opened during Q1 2013. There's clearly still some life in this burger-maker yet.