El Pollo Loco Holdings, Inc. (LOCO - Free Report) fell over 4% in afterhours trading on Mar 9, after the company reported mixed fourth-quarter 2016 results wherein the bottom line lagged the Zacks Consensus Estimate, while the top line beat the same.
Earnings and Revenue Discussion
El Pollo Loco’s fourth-quarter adjusted earnings of 12 cents per share missed the Zacks Consensus Estimate of 13 cents by 7.7%. Moreover, earnings fell 20% year over year due to lower margins and a higher share count.
Revenues of $92.5 million were up 7.2% year over year on increase in company-operated restaurant as well as franchise revenues. Revenues also surpassed the Zacks Consensus Estimate of $90.8 million by 1.9%.
Behind the Headline Numbers
Notably, system-wide comps fell 1.3% due to a decrease in comps at both company-operated and franchise restaurants.
Company-operated restaurant sales were $86.5 million, compared with $80.7 million in the year-ago quarter. The 7.1% improvement was mainly because of the opening of 29 new restaurants during and subsequent to the fourth quarter of 2015.
Meanwhile, comps at company-operated restaurant decreased 0.6% due to a 0.6% drop in traffic while average check remained flat.
Franchise-operated restaurant sales increased 7.8% year over year to $6 million mainly due to the opening of 16 new restaurants during and subsequent to the fourth quarter of 2015.
Meanwhile, comps at Franchise restaurants were down 1.9% in the quarter.
Restaurant contribution was $16 million (18.5% of restaurant revenues), lower than $17.4 million (21.5% of restaurant revenue) in the fourth quarter of 2015. The decrease in restaurant contribution margin was mainly due to elevated labor, occupancy and other operating expenses, higher costs related to restaurant openings along with a decrease in comps somewhat offset by lower food and paper costs.
El Pollo Loco’s full-year adjusted earnings of 66 cents were lower than the Zacks Consensus Estimate of 67 cents by 1.5%. Moreover, it decreased 7% from the year-ago quarter’s figure of 71 cents.
Full-year revenues of $380.1 million topped the Zacks Consensus Estimate of nearly $378.7 billion by 0.4% and increased 7.1% year over year.
The company expects 2017 pro forma earnings per share in the range of 65 cents to 69 cents. Meanwhile, the Zacks Consensus Estimate for 2017 earnings is pegged at 69 cents.
Adjusted Earnings before Interest, Tax, Depreciation and Amortization is expected in the band of $67.0 million to $70.0 million. Meanwhile, restaurant contribution margin is projected in the range of 20.4% to 20.8%.
The company expects system-wide comparable restaurant sales growth of flat to up 2%.
Meanwhile, El Pollo Loco plans to open 15–20 new company-owned restaurants and 8–12 new franchised restaurants in the year.
Zacks Rank & Stocks to Consider
El Pollo Loco has a Zacks Rank #3 (Hold). Better-ranked stocks in this sector include Potbelly Corporation (PBPB - Free Report) , Dave & Buster's Entertainment, Inc. (PLAY - Free Report) and Darden Restaurants, Inc. (DRI - Free Report) . All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Potbelly’s 2017 earnings climbed 2.2% over the past 30 days. The company’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 39.82%.
Dave & Buster's earnings surpassed the Zacks Consensus Estimate in the trailing four quarters, with an average beat of 37.81%. Meanwhile, for fiscal 2017, EPS is expected to improve 35.2%.
Darden’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 2.57%. Further, for fiscal 2017, EPS is expected to grow 11.2%.
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