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El Pollo Loco (LOCO) Expands Further in Texas with New Outlet

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Leading fire-grilled chicken chain in the U.S., El Pollo Loco Holdings, Inc. LOCO, opened its latest outlet in Rowlett, TX, on Jun 5. The 2,660-square-foot restaurant, located at 3101 Lakeview Pkwy., can accommodate 64 guests.

The outlet features the brand’s new ‘Vision Design’ and has an open kitchen layout to display the preparation of its signature dish. Notably, this marks the El Pollo Loco’s debut in the city of Rowlett and is the 13th location in the greater Dallas-Fort Worth (DFW) market.

El Pollo Loco currently has more than 465 company-owned and franchised restaurants in Arizona, California, Nevada, Texas and Utah. In fact, the company has opened eight company-owned restaurants year to date and expects to open a total of 15 to 20 new company-owned restaurants in 2017. Also, the company has exclusive multi-unit franchise opportunities available in key markets like Oklahoma, New Mexico, Louisiana and Arkansas.

Moving ahead, El Pollo Loco expects to drive growth through a number of initiatives such as its authentic advertising campaign, highlighting the brand’s differentiated offering, its recently launched mobile and online ordering app along with its plan to launch a loyalty program in the future. Meanwhile, menu innovation and limited time offers have been contributing to traffic at the restaurants.

We note that the shares of the company have outperformed the Zacks categorized Retail-Restaurants industry in the last one year. While El Pollo Loco shares rallied 16%, the industry witnessed a gain of 13.8%. Moreover, earnings estimates for current quarter and current year went up by 5.3% and 3%, respectively, over the past 60 days, reflecting the ongoing optimism in the stock.

Yet, a challenging sales environment given lower consumer spending in the U.S. restaurant space remains a potent headwind to the company’s top line while high costs may hurt profits.

Nevertheless, this Zacks Rank #3 (Hold) company’s continuous expansion plans are expected to add immensely to the top line and boost its overall performance as well.

Stocks to Consider

Better-ranked stocks in this sector include Darden Restaurants, Inc. (DRI - Free Report) , Dave & Buster's Entertainment, Inc. PLAY and Fogo de Chao, Inc. FOGO. All the three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Darden’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 3.35%. Further, for fiscal 2017, EPS is expected to grow 12.9%.

Dave & Buster's earnings surpassed the Zacks Consensus Estimate in the trailing four quarters, with an average beat of 34.15%. Meanwhile, for fiscal 2017, EPS is projected to witness a rise of 15.6%.

The Zacks Consensus Estimate for Fogo de Chao’s 2017 earnings moved up 2.2%, over the past 60 days. Moreover, for 2017, EPS is expected to improve 6.4%.

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