Sonic Drops on Q3 News

Posted Jun 22nd 2010 5:40PM by Steven Mallas
Filed under: Earnings Reports, McDonald's (MCD), Yum Brands (YUM)

Sonic Corporation (SONC) is down this afternoon by over 5%. At the time I was checking quotes on the stock, I came up with a price of $8.80. Not too encouraging for shareholders, especially considering that the volume was active.

Shares of the fast-food entity have traded in a narrow range over the last twelve months. The 52-week low is $8.07; the 52-week high is $13.11. The one-year chart shows an all-over-the-place situation; there's no smooth uptrend here. So, we need some fundamental guidance. The third-quarter report was released yesterday after the bell. What do the numbers say?

Well, the numbers tell us that this is not a business in prime working order. Net income came in at 18 cents per share, which represented a drop of nine pennies compared to the year-ago frame. System-wide same-store sales contracted 6%; a similar decline was observed in comps at partner drive-ins.

Back in March, I was bearish on the stock after the Q2 data. The Q3 results have done nothing to lift my spirits on the business. The comps weren't as bad, it's true, but I just don't feel a compulsion to speculate on a big, quick turnaround in the company's fortunes.

When you examine Sonic, you really come to appreciate a stock like McDonald's Corporation (MCD). In a market like this, I would definitely prefer attaching my portfolio to that blue-chip name (even if it is run by a clown). Or maybe even Yum! Brands (YUM): you've got to love the long-term prospects of that chain.

I'll wait for more news on Sonic. It could be a trade, or even an investment, later on. In my opinion, it's neither at the moment.

Disclosure: I don't own any company mentioned; positions can change without notice.

Tags: fast food, inthenews, MCD, mcdonalds, restaurants, SONC, Sonic, YUM, yum brands