KeyBanc Starts Sonic Auto (SAH) at Hold; Valuation Appears In-line with Historical Multiples
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Price: $80.83 --0%
Rating Summary:
5 Buy, 9 Hold, 3 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 7 | Down: 11 | New: 17
Rating Summary:
5 Buy, 9 Hold, 3 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 7 | Down: 11 | New: 17
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KeyBanc initiates coverage on Sonic Auto (NYSE: SAH) with a Hold.
KeyBanc analyst said, "We are initiating coverage of SAH with a HOLD rating as: 1) the Company is somewhat lagging its peers as its current focus
is on improving its core business, rolling out industry best practices (operational playbooks), deleveraging and purchasing underlying real estate; 2) catalysts exist for near and longer-term increases in the U.S. light
vehicle SAAR and, in particular, we expect luxury sales (approximately 50% of sales) to perform in line with industry results; 3) acquisitions appear unlikely over the near term, and given the Company's size and above-average share count, would be less incremental than for some of its smaller peers; 4) while there are some near-term gross profit margin headwinds across new, used and service, scale and business model improvements likely drive incremental gross profit, leverage of SG&A and earnings improvement; 5) while there is a controlling shareholder (Bruton Smith), his interests appear aligned with the Company and free cash flow is likely to be used to fund company initiatives and a small dividend; and 6) valuation appears relatively in line with historical multiples, but the potential does exist for multiple expansion as the Company's business model conforms with its peers, it further de-levers and the group itself potentially trades at a higher multiple. We are introducing earnings estimates of $1.34 (First Call consensus $1.35) for 2011 and $1.54 (First Call consensus $1.57) for 2012."
For an analyst ratings summary and ratings history on Sonic Auto click here. For more ratings news on Sonic Auto click here.
Shares of Sonic Auto closed at $15.47 yesterday.
KeyBanc analyst said, "We are initiating coverage of SAH with a HOLD rating as: 1) the Company is somewhat lagging its peers as its current focus
is on improving its core business, rolling out industry best practices (operational playbooks), deleveraging and purchasing underlying real estate; 2) catalysts exist for near and longer-term increases in the U.S. light
vehicle SAAR and, in particular, we expect luxury sales (approximately 50% of sales) to perform in line with industry results; 3) acquisitions appear unlikely over the near term, and given the Company's size and above-average share count, would be less incremental than for some of its smaller peers; 4) while there are some near-term gross profit margin headwinds across new, used and service, scale and business model improvements likely drive incremental gross profit, leverage of SG&A and earnings improvement; 5) while there is a controlling shareholder (Bruton Smith), his interests appear aligned with the Company and free cash flow is likely to be used to fund company initiatives and a small dividend; and 6) valuation appears relatively in line with historical multiples, but the potential does exist for multiple expansion as the Company's business model conforms with its peers, it further de-levers and the group itself potentially trades at a higher multiple. We are introducing earnings estimates of $1.34 (First Call consensus $1.35) for 2011 and $1.54 (First Call consensus $1.57) for 2012."
For an analyst ratings summary and ratings history on Sonic Auto click here. For more ratings news on Sonic Auto click here.
Shares of Sonic Auto closed at $15.47 yesterday.
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