Why Shares of Sonic Corporation Jumped
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 Corporation were looking tasty today, climbing as much as 12% and finishing up 11% on a strong second-quarter earnings report.
So what: The fast-food chain turned in an earnings of $0.07 per share on estimates of $0.06, while sales fell 1.3% to $109.7 million, short of expectations at $110.9 million. Same-store sales, a key industry metric, improved 1.4% as the company closed stores over the past year, affecting overall revenue. Other key indicators also moved up including restaurant-level operating margins, which increased 80 basis points.
Now what: Investors were also pleased with Sonic's guidance as the company said it expects EPS to grow 14%-15% with same-store sales in the low-single digits in the fiscal year. The EPS projection was slightly better than analyst estimates, and the market seemed pleased that the company was able to grow profits during a quarter where many retailers struggled. Shares of Sonic have doubled in the past year, but with modest growth expectations, the stock is starting to look pricey at a P/E of 30. Now may be a good time for investors to take some profits off the table.
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The article Why Shares of Sonic Corporation Jumped originally appeared on Fool.com.Jeremy Bowman and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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