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Strength Seen in El Pollo Loco (LOCO): Can Its 5.6% Jump Turn into More Strength?

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El Pollo Loco Holdings (LOCO - Free Report) shares rallied 5.6% in the last trading session to close at $18.04. 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 2.1% gain over the past four weeks.

Strong system-wide comparable restaurant sales and digitalization have been boosting investors’ sentiment. Moreover, the company recently announced that it is testing door-to-backyard drone delivery, which seems to have driven the stock higher.

This Tex-Mex fast food chain is expected to post quarterly earnings of $0.26 per share in its upcoming report, which represents a year-over-year change of +30%. Revenues are expected to be $117.27 million, up 17.7% 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 El Pollo Loco, the consensus EPS estimate for the quarter has remained unchanged over the last 30 days. And a stock's price usually doesn't keep moving higher in the absence of any trend in earnings estimate revisions. So, make sure to keep an eye on LOCO 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 >>>>

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