Sonic (SONC) Cut to “Sell” at Zacks Investment Research

Zacks Investment Research lowered shares of Sonic (NASDAQ:SONC) from a hold rating to a sell rating in a research note released on Saturday morning.

According to Zacks, “Sonic Corp., America’s Drive-in has built a dominant position in the drive-in restaurant business. They did it by sticking to what made drive-ins so popular in the first place: made-to-order American classics, signature menu items, speedy service from friendly Carhops and heaping helpings of fun and personality. Today, Sonic is the largest chain of drive-in restaurants in America. As a business, they continue to thrive, maintaining strong real sales growth, industry-leading customer frequency and high returns for their stockholders. So take a cruise through their website to learn more about our company and the people who help make it an American success story. “

Several other equities research analysts also recently weighed in on the stock. Telsey Advisory Group upped their price objective on shares of Sonic from $32.00 to $40.00 and gave the stock a market perform rating in a report on Wednesday, September 12th. Piper Jaffray Companies downgraded shares of Sonic from an overweight rating to a neutral rating in a report on Tuesday, September 25th. Wedbush started coverage on shares of Sonic in a report on Thursday, September 6th. They issued an outperform rating and a $42.00 price objective for the company. BidaskClub raised shares of Sonic from a buy rating to a strong-buy rating in a report on Thursday, October 11th. Finally, Barclays raised shares of Sonic from an underweight rating to an equal weight rating in a report on Wednesday, September 26th. One analyst has rated the stock with a sell rating, fourteen have issued a hold rating, one has assigned a buy rating and one has given a strong buy rating to the company. The stock currently has a consensus rating of Hold and a consensus target price of $36.08.

Shares of SONC opened at $43.46 on Friday. Sonic has a 1 year low of $23.22 and a 1 year high of $44.87. The firm has a market cap of $1.55 billion, a PE ratio of 29.17, a PEG ratio of 1.87 and a beta of 1.32.

Sonic (NASDAQ:SONC) last announced its quarterly earnings results on Tuesday, October 16th. The restaurant operator reported $0.52 earnings per share (EPS) for the quarter, beating the consensus estimate of $0.51 by $0.01. Sonic had a net margin of 16.81% and a negative return on equity of 21.64%. The company had revenue of $111.80 million during the quarter, compared to the consensus estimate of $113.22 million. During the same quarter in the previous year, the company posted $0.45 earnings per share. The company’s revenue for the quarter was down 9.5% compared to the same quarter last year. Sell-side analysts expect that Sonic will post 1.64 EPS for the current year.

Sonic announced that its board has authorized a stock repurchase program on Wednesday, August 8th that authorizes the company to repurchase $500.00 million in shares. This repurchase authorization authorizes the restaurant operator to reacquire up to 40.5% of its shares through open market purchases. Shares repurchase programs are usually a sign that the company’s leadership believes its stock is undervalued.

In other Sonic news, VP Carolyn C. Cummins sold 2,500 shares of the company’s stock in a transaction dated Monday, October 1st. The shares were sold at an average price of $43.31, for a total value of $108,275.00. The sale was disclosed in a filing with the Securities & Exchange Commission, which is available through this hyperlink. Also, insider John H. Budd III sold 89,176 shares of the company’s stock in a transaction dated Monday, October 1st. The shares were sold at an average price of $43.24, for a total transaction of $3,855,970.24. Following the completion of the sale, the insider now directly owns 32,065 shares of the company’s stock, valued at $1,386,490.60. The disclosure for this sale can be found here. 8.28% of the stock is currently owned by corporate insiders.

Hedge funds and other institutional investors have recently modified their holdings of the business. BlueMountain Capital Management LLC acquired a new stake in Sonic in the 3rd quarter valued at about $100,000. Point72 Asset Management L.P. lifted its holdings in Sonic by 109.0% in the 2nd quarter. Point72 Asset Management L.P. now owns 4,500 shares of the restaurant operator’s stock valued at $155,000 after acquiring an additional 54,500 shares during the last quarter. Virtu Financial LLC acquired a new stake in Sonic in the 3rd quarter valued at about $215,000. Blair William & Co. IL acquired a new stake in Sonic in the 3rd quarter valued at about $217,000. Finally, Engineers Gate Manager LP acquired a new stake in Sonic in the 2nd quarter valued at about $210,000. 89.15% of the stock is owned by institutional investors.

About Sonic

Sonic Corp., through its subsidiaries, operates and franchises a chain of drive-in restaurants in the United States. As of August 31, 2018, the company operated 3,606 Sonic Drive-Ins in 45 states, including 3,427 Drive-Ins owned and operated by franchisees; and 179 Drive-Ins owned and operated by the company.

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