Sonic Automotive Inc (SAH.N), the No. 3 U.S. auto dealer group, posted a higher-than-expected quarterly profit and offered a strong outlook for 2012, sending its shares up nearly 7 percent on Tuesday.
Analysts credited cost-cutting, higher new and used vehicle pricing, and lower taxes for the fourth-quarter results.
As U.S. auto sales have recovered, dealer groups have benefited. AutoNation Inc (AN.N), Penske Automotive Group Inc (PAG.N) and Group 1 Automotive Inc (GPI.N) saw similar fourth-quarter sales gains to the 12 percent increase that Sonic reported.
Sonic's net income in the fourth quarter fell to $20.54 million, or 35 cents a share, compared with $64.35 million, or $1.00 a share, a year earlier.
Excluding one-time items, Sonic earned 43 cents a share, topping the average estimate of analysts polled by Thomson Reuters I/B/E/S by 5 cents.
UBS analyst Colin Langan, who has a "neutral" rating on Sonic stock, said in a research note that lower-than-expected costs added 9 cents a share to earnings, while higher pricing contributed 4 cents and lower taxes, 3 cents.
Revenue rose 12 percent to $2.07 billion, just above the $2.06 billion analysts had expected. Company executives said new and used vehicle sales growth had outpaced that of the industry.
Sonic's new vehicle retail sales rose 15 percent, compared with 10 percent growth for the industry. Used vehicle sales rose 11 percent.
For 2012, Sonic expects U.S. new vehicle industry sales of about 13.5 million vehicles.
As a result, the company expects its 2012 earnings from continuing operations to be in the range of $1.55 to $1.65 a share. The mid-point of that range at $1.60 is above the $1.57 analysts were expecting.
Sonic shares were up 6.8 percent at $17.85 in morning trading on the New York Stock Exchange.
(Reporting By Ben Klayman in Detroit; Editing by Derek Caney and Lisa Von Ahn)