Sonic Automotive Inc-Class A (NYSE:SAH) reported third-quarter financial results that presented a complex picture for investors, delivering record top-line performance that significantly exceeded expectations while facing profitability headwinds that appear to be driving a negative market reaction.
Earnings Versus Estimates
The automotive retailer posted impressive revenue growth but fell short on profitability metrics compared to analyst expectations. The company reported total revenues of $4.0 billion for the quarter, representing a 14% year-over-year increase and substantially surpassing the analyst estimate of $3.66 billion. This performance marks an all-time record for quarterly revenues.
However, the earnings picture proved more challenging. Sonic Automotive reported adjusted earnings per share of $1.41, which came in below the analyst consensus estimate of $1.74. This earnings miss occurred despite the strong revenue performance, indicating margin pressures within the business.
The market reaction reflected this mixed performance, with the stock trading down approximately 3.7% in pre-market activity following the earnings release.
Quarterly Performance Highlights
The third-quarter results revealed several key strengths and challenges across Sonic Automotive's diversified business segments:
- Record consolidated revenues of $4.0 billion, up 14% year-over-year
- Record consolidated gross profit of $615.5 million, up 13% year-over-year
- Reported net income of $46.8 million decreased 37% year-over-year
- Adjusted net income of $49.5 million increased 13% year-over-year
- Powersports Segment delivered record results with revenues up 42%
- EchoPark Segment revenues declined 4% with unit sales volume down 8%
- Franchised Dealerships Segment showed strong same-store performance with revenues up 11%
Segment Performance Breakdown
The company's three operating segments demonstrated varied performance during the quarter. The Franchised Dealerships Segment continued to be the core driver of profitability, generating record fixed operations and F&I gross profit that combined accounted for over 75% of total gross profit mix. Same-store performance was particularly strong across multiple categories.
The Powersports Segment emerged as a standout performer, achieving all-time record quarterly results driven by strong sales volume and improved inventory management. This segment's revenue grew 42% to $84.1 million with segment income nearly doubling to $7.8 million.
In contrast, the EchoPark Segment faced challenges with vehicle gross margin headwinds and declining unit sales volume. The segment reported a 4% revenue decline to $522.5 million and a 7% decrease in adjusted segment income to $2.7 million.
Financial Position and Capital Allocation
Sonic Automotive maintained a solid financial position with approximately $264 million in cash and floor plan deposits on hand as of September 30, 2025, with total liquidity of approximately $815 million. The company's Board of Directors approved a quarterly cash dividend of $0.38 per share, representing a 27% increase from the prior year period.
Management emphasized a continued focus on deploying capital through a diversified growth strategy across all three segments to grow the revenue base and enhance shareholder returns. The recently acquired Jaguar Land Rover Santa Monica dealership is expected to add approximately $125 million in annualized revenues to the Franchised Dealerships Segment.
Forward Outlook and Analyst Expectations
Looking ahead, analysts project continued growth for Sonic Automotive with full-year 2025 revenue estimates of $14.91 billion and fourth-quarter 2025 revenue estimates of $3.90 billion. The company's leadership acknowledged uncertainty around the future impact of tariffs on consumer demand, vehicle pricing, gross margins, and inventory levels but expressed confidence in their strategy to adapt to changing market conditions.
The market's negative reaction to the earnings release appears to reflect concerns about the earnings miss and challenges in the EchoPark Segment, despite the strong revenue beat and record overall performance.
For detailed earnings estimates and future projections, investors can review additional information on the company's earnings page.
Disclaimer: This article is for informational purposes only and does not constitute investment advice, financial analysis, or recommendation to buy or sell any security. Investors should conduct their own research and consult with financial advisors before making investment decisions.
