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Sonic Automotive (SAH) Surges 5.5%: Is This an Indication of Further Gains?

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Sonic Automotive (SAH) shares rallied 5.5% in the last trading session to close at $36.53. This move can be attributable to notable volume with a higher number of shares being traded than in a typical session. This compares to the stock's 20.2% loss over the past four weeks.

Sonic is riding on its strategic acquisitions, especially the buyout of RFJ Auto Partners. The deal has catapulted the firm into the top-five biggest dealership groups in the United States. The company is also benefitting from its used vehicle unit EchoPark. Rising new and used vehicle prices is set to drive Sonic’s top-line growth.

This auto dealer is expected to post quarterly earnings of $2.53 per share in its upcoming report, which represents a year-over-year change of -3.8%. Revenues are expected to be $4.02 billion, up 19.9% from the year-ago quarter.

Earnings and revenue growth expectations certainly give a good sense of the potential strength in a stock, but empirical research shows that trends in earnings estimate revisions are strongly correlated with near-term stock price movements.

For Sonic Automotive, the consensus EPS estimate for the quarter has been revised 1.6% lower over the last 30 days to the current level. And a negative trend in earnings estimate revisions doesn't usually translate into price appreciation. So, make sure to keep an eye on SAH going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

Sonic Automotive is a member of the Zacks Automotive - Retail and Whole Sales industry. One other stock in the same industry, Lithia Motors (LAD), finished the last trading session 6.1% higher at $270.11. LAD has returned -10.3% over the past month.

Lithia Motors' consensus EPS estimate for the upcoming report has changed +7.9% over the past month to $11.85. Compared to the company's year-ago EPS, this represents a change of +6.6%. Lithia Motors currently boasts a Zacks Rank of #3 (Hold).

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