Sonic Corp. (NASDAQ:SONC)
Sonic Corp. (SONC), a franchise quick-service drive-in restaurant chain, last week reported their fiscal third quarter 2016 financial results.
Sonic reported third quarter earnings of $0.43 per share, which beat analyst expectations of $0.42 per share. Sonic reported third quarter revenues of $165.24 billion, which was slightly less than analyst expectations of $165.80 billion. Sonic did lower guidance for same store sales to be in between 2% and 4% from prior guidance of 4% to 6%.
Sonic Corp. CEO’s Comments
“Although consumer trends slowed somewhat in April and May, our business performed well during the quarter overall, generating 2.0% same-store sales growth for the system and adjusted earnings per share growth of 19%,” said Cliff Hudson, Sonic Corp. CEO. “Our system opened fifteen net new drive-ins during the quarter, a strong increase compared to the same period a year ago. The product pipeline remains robust with recent introductions of premium products like Frozen Lemonades and Limeades and Bacon Lovers Chili Cheese Coneys. While the consumer environment has weakened, Sonic remains focused on delivering one of the most differentiated customer experiences in the quick service industry.”
“We are also pleased to have completed our debt transaction during the third quarter, allowing us to maintain a solid capital structure while returning excess cash to shareholders,” continued Hudson. “As well, we are excited to announce our intention to move toward an approximately 95%-franchised system by the end of fiscal year 2017. We believe the divestiture will improve the capital efficiency of Sonic Corp. and allow our franchisees to optimize performance of the refranchised stores and expand our brand in the same markets.”
SONC Technical Analysis
SONC opened trading yesterday at $29.82, which was up from the previous day's trading of $29.50. SONC closed trading yesterday at $30.35 and tumbled down after market to $28.60, equivalent to a 6% decrease from the closing price.
Taking a look at the daily chart, we can see the last time SONC traded below these levels was on June 13th when it traded at $28.16. Taking a closer look at the daily chart, we can see that SONC has been in a downward trend dating back to April 6th when it traded at its 52-week high price of $36.34.
SONC has a float of 43.10 million shares and traded 1.48 times the normal daily trading volume on Thursday.
For trading purposes, I would like to see SONC open trading on Friday below $29.20, and if it does I would be looking to take a short position at the bell. My stop loss would be $0.25 from my entry position, fearing anything more than that and the stock would start to fill in the gap down.
Company Profile
Sonic Corp. operates and franchises a chain of quick-service drive-in restaurants in the United States. As of August 31, 2015, the company operated 3,526 Sonic Drive-Ins in 44 states, which included 387 company drive-ins and 3,139 franchise drive-ins. It also leases real estate properties. The company was founded in 1953 and is headquartered in Oklahoma City, Oklahoma.