Sonic (NASDAQ:SONC) Still Surrounded by Limited Visibility

Barclays said they see strong pressure on Sonic (NASDAQ:SONC), especially on labor and food, and see margins falling going forward. They do hesitate to draw any conclusion yet until there is more visibility.

Barclays said, "We expect EPS of $0.09, -10% y-y, and $0.01 below the Street. Quarterly guidance was not provided. Comps had improved sequentially since June (down 6.4% in 4QF10) through the first six weeks of 1QF11. Our forecast is for F1Q comps down 4%, similar co-op and franchise. A 1pp change in comp is worth $0.03 to annual EPS. We expect operating expense pressure with continued de-leverage on negative comps (especially in lower sales volume 1HF11), with the greatest pressure on food and labor. We expect restaurant margins down 125bp to 11.8%."

"...While SONC outperformed in anticipation of easing comp and margin compares, we maintain our Equal Weight due to limited visibility."

Barclays maintains an "Equalweight" rating on Sonic, which closed Tuesday at $10.10, gaining $0.02, or 0.20 percent. Barclays has a price target on Sonic of $8.