Today’s pick is a quick service restaurant that has been in business since 1953.
Sonic Corp. (SONC)
from The Earnings Scope
Sonic Corp. (SONC) owns 396 drive-in restaurants and 3,126 franchise drive-ins. The fast food restaurants are known for their waitress service on roller skates, juicy burgers, and humongous milkshakes. SONC is one of the very few quick service restaurants that actually serves food that you can eat.
We first recommended SONC in this newsletter three years ago after reviewing their financials and observing that about 20 of their restaurants we visited were packed. The stock is up 300% since then. In the prior quarter, same-store sales increased 6% YoY and net income increased 20% to $0.30 per share, which met estimates.
In the previous quarter, the company refinanced a portion of its debt, which will result in annual interest savings of $2.5 million. The board also initiated a $40 million buyback program, after completing a $36 million buyback program in 2013. Management also gave guidance for fiscal 2014, with earnings growth expected in the range of 14% - 15%, and free cash flow of $15 - $25 million. The sell-side is expecting earnings growth this quarter of 18% to $0.13 per share. We think SONC will beat that by a penny.
SONC is a well-managed company with a quality product. Keep buying.
Tom Byrne, The Earnings Scope, www.analystsonline.com, 406-465-4663, January 6, 2014