Why Sonic Automotive Inc. Stock Fell

Is this meaningful? Or just another movement?

Jeremy Bowman
Jeremy Bowman
Jul 22, 2014 at 3:24PM
Consumer Goods

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Sonic Automotive Inc. (NYSE:SAH) were decelerating today, falling as much as 10% after the car dealership posted second-quarter results this morning.

So what: Sonic delivered revenue growth of 6.8% to $2.35 billion, short of $2.38 billion, while on the bottom line, earnings per share came at $0.51, missing expectations at $0.53. Company President B. Scott Smith called the performance in the quarter "solid," and said the One-Sonic-One Experience initiative, designed to bring a revolutionary shopping and buying experience to the customer, and the pre-owned-vehicle initiative, which is the product of a proprietary inventory management system that helps drive used vehicle sales, should boost growth in the second half of the year. 

Now what: Sonic stock mostly recovered throughout the session, trading just 4% toward close as some bullish options buying seemed to lift shares. Considering the earnings miss was mild, a 10% sell-off seems exaggerated. Auto dealerships are also heavily influenced by macroeconomics, and with car sales continuing to grow after a long lull, Sonic figures to benefit. For long-term investors, there seems to be little reason to adjust your investment thesis based on today's report.