Why Sonic Corporation Stock Is Getting a Lift Today
What happened
Shares of Sonic Corporation (NASDAQ: SONC), the quick serve restaurant that still employs roller-skating wait staff,got a lift Wednesday after the company released its fiscal second-quarter earnings for the period endedFeb. 28that were better than expected. Thestock was up nearly 12% in early trading Wednesday, though gave up much of those gains by mid-day.
So what
For the quarter, the fast food chain reported revenue of just over $100 million, which seems to be just below most analysts expectations. Additionally, same store sales looked weak, declining more than 7% year over year. However, Sonic reported net income of $11 million, or $0.25 per share, which is up 14% compared with the same period a year ago. Sonic management expects comps to be flat or down 2% for the full fiscal year, which would at least be a major improvement over the current decreases.
Image source: Sonic Corporation.
Now what
Sonic's earnings results and comparable store forecast are welcome changes to what otherwise has felt like a tough year so far -- as the stock is down nearly 30% over the last year. Sonic stock has still been an outperformer in recent years, rising 240% over the last five years. Compare that with McDonald's (NYSE: MCD), which is up about 30% over the last five years. That has been viewed largely as a turnaround success for the company, which has grown through implementing all-day breakfast and narrowing down on its best performing menu items.
Sonic certainly still has a sizable presence in the U.S., with over 3,500 locations and a presence in nearly every state. Sonic's franchise model -- it only owns about 10% of those locations -- seems to be profitable for the company, and focusing on moving an even higher percentage of locations to franchisees could drive profitability higher. During the quarter, Sonic opened 10new drive-ins, but refranchised54 locations.
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Seth McNew has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.