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El Pollo Loco's (LOCO) Shares Down Despite Q1 Earnings Beat
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El Pollo Loco Holdings, Inc. (LOCO - Free Report) reported better-than-expected results in the first quarter of 2018.
Pro-forma earnings of 17 cents per share surpassed the Zacks Consensus Estimate of 16 cents by 6.3%. Earnings also increased by the same percentage from the year-ago level on the back of increased revenues.
Total revenues increased 6% year over year to $105.8 million and surpassed the consensus estimate of $103.5 million. The revenue growth was primarily driven by an increase in company-operated restaurant sales.
The company’s aggressive sales building efforts like relentless focus on providing excellent service, reasonable pricing and advertising campaigns have favored the top line.
El Pollo Loco Holdings, Inc. Price, Consensus and EPS Surprise
Despite earnings beat, a restated guidance for 2018 might have had let investors down as shares of El Pollo Loco have witnessed a 1% decline in after-hours trading post the company’s earnings release on May 3. Also, the company’s shares have lost 29.2% in the past year, underperforming the industry’s gain of 2.7%.
Let’s delve deeper into the numbers.
Sales Discussion
Company-operated restaurant revenues in the first quarter increased 1.2% from the year-ago quarter to $94.6 million, driven by the opening of 18 new restaurants during and after the first quarter of 2017. However, seven restaurants were closed down during the same time period that somewhat negatively affected the company-operated restaurant revenues. A decline in comps also partially dented the company-operated restaurant revenues.
Comps at the company-operated restaurants declined 2% in the quarter, due to 1.7% and 0.3% fall in transactions and average check, respectively.
First-quarter franchise revenues decreased 3.4% year over year to $6.1 million, due to a fall in franchise and development agreement fees, but was partially offset by the contribution from 10 new restaurants opened during and subsequent to the first quarter of 2017. A 0.4% fall in franchise comps also negatively affected the franchise revenues.
System-wide comps declined 1.1% from the prior-year quarter.
Expenses, Adjusted EBITDA and Net Income
Total expenses in the first quarter amounted to $101.3 million, up 12.1% from the year-ago quarter. The rise in expenses was largely due to a 3.2% increase in company restaurant expenses, 35.6% rise in general and administrative expenses and a record surge in franchise expenses.
Adjusted EBITDA (Expense Before Interest Tax Depreciation Amortization) in the quarter came in at $14.6 million, reflecting a 8.6% year-over-year decline.
Adjusted net income in the first quarter of 2018 was $6,730 compared with net income of $6,116 in the first quarter of 2017.
Balance Sheet
Cash and cash equivalents as of Mar 28, 2018 totaled $6.2 million, up from $8.6 million as of Dec 27, 2017. Total debt by the end of the quarter was $85.3 million, down from $93.3 million at the end of 2017.
Stockholders’ equity amounted to nearly $274.5 million as of Mar 28, 2018 compared with $275 million as of Dec 27, 2017.
2018 Guidance Reiterated
El Pollo Loco continues to expect 2018 pro-forma net income per share in the range of 68-73 cents.
System-wide comps growth is still projected to be flat compared with 2017. The company plans to open six to eight company-owned and franchised restaurants.
Adjusted EBITDA is expected in the range of $61.0-$64.0 million, similar to the previous guidance.
Darden (DRI - Free Report) reported mixed third-quarter fiscal 2018 results, wherein earnings surpassed the Zacks Consensus Estimate while revenues lagged the same. Adjusted earnings of $1.71 per share increased 29.5% year over year on the back of higher revenues.
Restaurant Brands’ (QSR - Free Report) first-quarter 2018 earnings and revenues surpassed the Zacks Consensus Estimate. Earnings under the previous accounting standard came in at 67 cents, growing 86.1% from the prior-year quarter.
Chipotle’s (CMG - Free Report) first-quarter 2018 earnings surpassed expectations while revenues were in line with the same. Adjusted earnings of $2.13 grew 33.1% from the year-ago quarter driven by higher revenues and lower food costs.
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El Pollo Loco's (LOCO) Shares Down Despite Q1 Earnings Beat
El Pollo Loco Holdings, Inc. (LOCO - Free Report) reported better-than-expected results in the first quarter of 2018.
Pro-forma earnings of 17 cents per share surpassed the Zacks Consensus Estimate of 16 cents by 6.3%. Earnings also increased by the same percentage from the year-ago level on the back of increased revenues.
Total revenues increased 6% year over year to $105.8 million and surpassed the consensus estimate of $103.5 million. The revenue growth was primarily driven by an increase in company-operated restaurant sales.
The company’s aggressive sales building efforts like relentless focus on providing excellent service, reasonable pricing and advertising campaigns have favored the top line.
El Pollo Loco Holdings, Inc. Price, Consensus and EPS Surprise
El Pollo Loco Holdings, Inc. Price, Consensus and EPS Surprise | El Pollo Loco Holdings, Inc. Quote
Despite earnings beat, a restated guidance for 2018 might have had let investors down as shares of El Pollo Loco have witnessed a 1% decline in after-hours trading post the company’s earnings release on May 3. Also, the company’s shares have lost 29.2% in the past year, underperforming the industry’s gain of 2.7%.
Let’s delve deeper into the numbers.
Sales Discussion
Company-operated restaurant revenues in the first quarter increased 1.2% from the year-ago quarter to $94.6 million, driven by the opening of 18 new restaurants during and after the first quarter of 2017. However, seven restaurants were closed down during the same time period that somewhat negatively affected the company-operated restaurant revenues. A decline in comps also partially dented the company-operated restaurant revenues.
Comps at the company-operated restaurants declined 2% in the quarter, due to 1.7% and 0.3% fall in transactions and average check, respectively.
First-quarter franchise revenues decreased 3.4% year over year to $6.1 million, due to a fall in franchise and development agreement fees, but was partially offset by the contribution from 10 new restaurants opened during and subsequent to the first quarter of 2017. A 0.4% fall in franchise comps also negatively affected the franchise revenues.
System-wide comps declined 1.1% from the prior-year quarter.
Expenses, Adjusted EBITDA and Net Income
Total expenses in the first quarter amounted to $101.3 million, up 12.1% from the year-ago quarter. The rise in expenses was largely due to a 3.2% increase in company restaurant expenses, 35.6% rise in general and administrative expenses and a record surge in franchise expenses.
Adjusted EBITDA (Expense Before Interest Tax Depreciation Amortization) in the quarter came in at $14.6 million, reflecting a 8.6% year-over-year decline.
Adjusted net income in the first quarter of 2018 was $6,730 compared with net income of $6,116 in the first quarter of 2017.
Balance Sheet
Cash and cash equivalents as of Mar 28, 2018 totaled $6.2 million, up from $8.6 million as of Dec 27, 2017. Total debt by the end of the quarter was $85.3 million, down from $93.3 million at the end of 2017.
Stockholders’ equity amounted to nearly $274.5 million as of Mar 28, 2018 compared with $275 million as of Dec 27, 2017.
2018 Guidance Reiterated
El Pollo Loco continues to expect 2018 pro-forma net income per share in the range of 68-73 cents.
System-wide comps growth is still projected to be flat compared with 2017. The company plans to open six to eight company-owned and franchised restaurants.
Adjusted EBITDA is expected in the range of $61.0-$64.0 million, similar to the previous guidance.
Zacks Rank & Peer Releases
Currently, El Pollo Loco carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Darden (DRI - Free Report) reported mixed third-quarter fiscal 2018 results, wherein earnings surpassed the Zacks Consensus Estimate while revenues lagged the same. Adjusted earnings of $1.71 per share increased 29.5% year over year on the back of higher revenues.
Restaurant Brands’ (QSR - Free Report) first-quarter 2018 earnings and revenues surpassed the Zacks Consensus Estimate. Earnings under the previous accounting standard came in at 67 cents, growing 86.1% from the prior-year quarter.
Chipotle’s (CMG - Free Report) first-quarter 2018 earnings surpassed expectations while revenues were in line with the same. Adjusted earnings of $2.13 grew 33.1% from the year-ago quarter driven by higher revenues and lower food costs.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>