Sonic Automotive delivered record revenue and record gross profit in the third quarter, but the earnings line tells a different story. Adjusted EPS of $1.30 fell 20.2% short of the $1.66 consensus and the $1.63 Earnings Whisper number, and declined 7.8% from a year ago. Revenue of $3.989 billion rose just 0.4% and missed consensus by 0.8%. The miss also marks a clear sequential slide, with adjusted EPS of $1.82 in Q2 and $1.62 in Q1. GAAP EPS was $1.28. The central tension is that Sonic is growing in its smaller segments while the franchised dealership core loses earnings power faster than EchoPark and Powersports can replace it.
The quality of the quarter deserves scrutiny. Consolidated gross profit rose only $2 million, to $617.5 million, while SG&A climbed $15 million. Adjusted SG&A rose to 75.4% of gross profit from 72.8%, a 260-basis-point deterioration, and operating income fell 8%. Non-floor-plan interest expense also rose 11%. Adjusted net income fell 15%, considerably worse than the per-share decline. An 8% reduction in diluted share count did a lot of work in narrowing the EPS drop. Franchised Dealerships adjusted segment income fell 25%, to $48.1 million. On a same-store basis, new units fell 7%, used-vehicle gross profit per unit slipped 3% to $1,506, and total gross profit declined 1%.
The call made clear that fixed operations, the steady anchor of any dealer thesis, is the most important change. Same-store fixed ops gross profit growth slowed to 1%, from 2% in Q2 and stronger customer-pay and warranty gains in Q1. Management cut its full-year expectation to roughly 3%, down from the mid-single-digit outlook it had reiterated through Q2. It also would not commit to a recovery before mid-2027. Management was unusually candid on the cause, conceding that "we got too expensive" on service pricing as consumers traded down to independents. Value pricing lifted customer-pay repair orders 3% sequentially, and management is rolling out AI-driven pricing tools. There were bright spots in the franchised business. New-vehicle gross profit per unit held at $3,000 same-store, and management narrowed its full-year range toward the upper end. Management attributed much of the new-unit decline to a prior-year EV pull-forward of roughly 2,200 units. Management also said franchise SG&A remains within full-year guidance, but savings from loaner-fleet reductions will not appear until Q1 2027.
EchoPark is the growth story, though not yet a profit story. Retail units rose 22% to 19,923, accelerating from 17% in Q2 and 3% in Q1, and revenue grew 14%. However, total gross profit per unit fell 12% to $2,972, below the $3,100-$3,300 target set last quarter, and F&I per unit dropped 15%. Reported segment income was just $2.0 million. Full-year EchoPark EBITDA is tracking toward roughly $42-44 million, well above the original ~$30 million midpoint. However, Q4 is guided to only $2-4 million as Sonic spends $5-7 million on its largest-ever brand campaign. That spend continues into early 2027, alongside a December Orlando opening and two to four new stores planned for 2027. Powersports posted record revenue of $113.7 million, up 35%, helped by a record Sturgis rally. Still, same-store gross profit dipped 1%, and segment income rose only 1%, which suggests acquisitions are driving most of that growth.
Balance-sheet flexibility is narrowing at the same time. Liquidity fell to about $585 million, from $676 million in Q2 and $770 million in Q1. Management is weighing buybacks against its $528 million remaining authorization and acquisitions such as the well-performing Porsche Walnut Creek store. The quarterly dividend of $0.41 is up 8% year over year.
The market had largely anticipated trouble. Shares entered the report at $63.12, down 40% from the $105.16 open following the July report, which also marked the inter-earnings high. The stock sits 13.7% below its 200-day moving average and only 8% above its September 30 low of $58.46. Investor sentiment swung from modestly positive (0.218) to slightly negative (-0.068), a meaningful shift for this scale. Price and AVWAP trend readings remain negative, although sequential growth readings are still positive.
The bottom line is that Sonic missed badly on earnings, and the composition of the miss matters more than its size. The service business is slowing, SG&A is deleveraging, and EchoPark's volume gains come with thinner per-unit economics and heavy near-term marketing spend. Bulls can point to accelerating EchoPark units, resilient new-vehicle margins, and cost actions aimed at 2027. Bears have legitimate ammunition in the fixed ops guidance cut, shrinking liquidity, and a soft Q4 setup. With the stock already down 40%, much pessimism is priced in, but a credible recovery case now rests on evidence that may not arrive until next year.