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What's in Store for El Pollo Loco (LOCO) in Q1 Earnings?

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El Pollo Loco Holdings, Inc. (LOCO - Free Report) is scheduled to report first-quarter 2018 results on May 3, after market closes.

The company’s strong sales building strategies and consistent unit development are likely to reflect in the first quarter’s top line. However, the bottom line is likely to have remained under pressure in the quarter.

Let’s find out how the company will shape up in first-quarter results.

Will the Overall Top Line Gain?

The Zacks Consensus Estimate for El Pollo Loco’s first-quarter revenues is pegged at $103.45 million, suggesting growth of 3.7% from the first quarter of 2017. This estimated growth is attributable to the company’s various sales building efforts. The company’s relentless focus on providing excellent service and reasonable pricing, and its advertising campaigns are expected to continue boosting revenues. Banking on menu innovation, limited-time offers and a strong brand positioning, the company witnessed sales growth in the last reported quarter. The trend is expected to continue in the to-be-reported quarter as well.

In addition to these innovative strategies, El Pollo Loco has made significant progress with various technology initiatives, designed to provide convenience to loyalty customers. Last year, the company had initiated a partnership with Olo's Dispatch Delivery service that currently covers 65-70% of El Polo Loco’s system-wide locations.

While these initiatives are likely to have boosted its traffic, El Pollo Loco’s brand re-launching program may have affected its first-quarter comps. In January 2018, the company closed two restaurants in Texas. Subsequently, the consensus estimate indicates a decline of 1.1% in system-wide comps in the first quarter, comparing unfavorably with 0.3% fall in the year-ago quarter and 1.40% surge in the prior quarter. Also, franchise and company-owned comps in the first quarter are estimated to fall 0.8% and 1.47%, respectively, comparing unfavorably with the prior-year quarter’s comps.

Factors Likely to Impact Earnings

The consensus estimate for first-quarter earnings is pegged at 16 cents, showing no change from the prior-year quarter. The company’s higher labor costs, pre-opening costs of outlets and expenses related to the execution of various sales-building initiatives might have put profits under pressure.

Increasing costs are expected to more than offset the benefits from revenue growth. Moreover, as the company is in the middle of a brand re-launching initiative, its margins are likely to be under pressure.

Our Quantitative Model Does Not Predict a Beat

El Pollo Loco does not have the right combination of two main ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

Zacks ESP: The company has an Earnings ESP of -1.24%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The restaurant has a Zacks Rank #3.

Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

 

El Pollo Loco Holdings, Inc. Price and EPS Surprise

 

 

Stocks to Consider

Here are some companies in the restaurant space, which per our model have the right combination of elements to post an earnings beat in the to-be-reported quarter.

Wingstop (WING - Free Report) carries a Zacks Rank #3 and has an Earnings ESP of +5.66%. Wingstop is scheduled to release first-quarter results on May 3, after the market closes. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Del Taco has an Earnings ESP of +10.0% and a Zacks Rank #2 (Buy). The company is slated to release quarterly numbers on May 3, after the market closes.

Jack in the Box (JACK - Free Report) has an Earnings ESP of +2.33% and carries a Zacks Rank #3. The company is expected to report quarterly results on May 15.

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