Sonic Earnings: Company Survives CDK Cyberattack to Still Have Decent Second Quarter

After adjusting our model for how 2024 is trending, we are leaving our fair value estimate for Sonic Automotive in place. Second-quarter adjusted diluted EPS fell 19.7% year over year to $1.47 but still beat the $1.38 LSEG consensus. Sonic uses CDK as its dealer management system provider, so GAAP earnings had about a $30 million pretax profit hit from the cyberattack that affected CDK starting on June 19. Sonic’s system is again operational but was having problems well into July. Within the $30 million, Sonic took an $11.6 million special item charge for compensation given to sales and service technicians to make up for lost business, something the other dealers we cover also did. We consider the payout prudent as it likely helped retention, and we don’t see a good reason to lose people for a temporary business interruption. The breakout of lost business between sales and service was not disclosed, but we don’t expect a lot of the $30 million to be made up in the second half of 2024 as consumers likely already bought a vehicle at another dealer or used-vehicle retailer and not all service needs can be deferred.