(Updates throughout with stock prices, comment, background; changes dateline from CHARLOTTE, N.C.)
By Justin Hyde
DETROIT, Dec 17 (Reuters) - Auto dealer Sonic Automotive Inc. on Tuesday lowered its earnings estimates for the fourth quarter and all of 2003 on slower than expected sales of new vehicles.
The warning, the second in a week by a dealer group, sent Sonic shares down sharply and pulled down those of AutoNation Inc. , the U.S. market leader.
Sonic said it lowered its estimates because of "a slower new vehicle sales environment, particularly in our domestic franchises."
U.S. new vehicle sales hit their lowest rate in four years in October and rebounded only slightly in November, when Detroit's Big Three automakers hit a record low for market share.
Another dealer group, Group 1 Automotive Inc. , said on Thursday it was cutting its earnings estimates due to disappointing new vehicle sales. While new vehicles often provide the largest revenue stream for dealers, other businesses, such as used cars, service and financing, offer larger margins.
Stephens Inc. analyst Rick Nelson said Sonic's warning did not surprise him, given the weak sales pace in October and November. He also said used-car prices have also been weakening, while inventories continue to grow.
"I wouldn't be surprised if we saw additional announcements coming out of the industry," Nelson said.
Sonic said it now expects fourth-quarter earnings of 48 cents to 52 cents a share, down from its previous estimate of 62 cents to 66 cents. Year-earlier earnings were 51 cents.
For 2003, the company reset its earnings target to between $2.70 and $2.80 per share from a previous range of $2.95 to $3.05. It estimated 2002 earnings at $2.44 to $2.48.
To improve earnings, Sonic said it will reduce its new-vehicle inventory levels and make other unspecified cost cuts. The company has 188 new-vehicle franchises.
Sonic's shares were off $1.17, or 7.4 percent, at $14.57 in midday New York Stock Exchange trading, while AutoNation was down 88 cents, or 7 percent, at $11.71.