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El Pollo Loco (LOCO) Q2 Earnings & Revenues Meet Estimates

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El Pollo Loco Holdings, Inc. (LOCO - Free Report) reported second-quarter 2018 results, wherein earnings and revenues came in line with the Zacks Consensus Estimate.

Adjusted earnings of 22 cents per share matched the consensus mark but increased 4.8% on a year-over-year basis. Total revenues rose 5.7% year over year to $111.6 million and came almost in line with consensus estimate of $112 million. Increased company-operated restaurant sales drove the top line.

Also, El Pollo Loco’s aggressive sales building efforts like relentless focus on providing excellent service, reasonable pricing and advertising campaigns boosted revenues in the quarter under review.

Let’s delve deeper into the numbers

Revenue Discussion

Company-operated restaurant revenues in the second quarter inched up 0.8% from the year-ago quarter to $99.6 million. The uptick was driven by the launch of 14 new restaurants during and after the second quarter of 2017. However, seven restaurants were closed down in the same time period, which somewhat 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 1.6% in the quarter due to a 2.5% fall in transactions, which partially overshadowed 0.9% gain in average check.

Second-quarter franchise revenues decreased 2% year over year to $6.6 million. This downside can be attributed to a fall in franchise and development agreement fees, partially offset by the contribution from seven new restaurants opened during and subsequent to the second quarter of 2017. A 0.3% fall in franchise comps also negatively impacted the franchise revenues.

System-wide comps declined 0.9% from the prior-year quarter number.

El Pollo Loco Holdings, Inc. Price, Consensus and EPS Surprise

Expenses, Adjusted EBITDA and Net Income

Total expenses in the second quarter amounted to $104 million, up 12.1% from the year-ago quarter. The rise in expenses was largely owing to a 2.8% increase in company restaurant expenses, a 30.3% 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 $17.5 million, reflecting a 10.9% year-over-year decline.

Adjusted net income summed $8.6 million compared with net income of $8.2 million in the second quarter of 2017.

Balance Sheet

Cash and cash equivalents as of Jun 27, 2018 were $13.1 million, up from $8.6 million as of Dec 27, 2017. Total debt by the end of the quarter was $86.3 million, down from $93.3 million at the end of 2017.

Stockholders’ equity amounted to nearly $280.1 million as of Jun 27, 2018 compared with $275 million as of Dec 27, 2017.

2018 Guidance

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 7-8 company-owned and 8-10 new franchised restaurants in the current year.

For 2018, adjusted EBITDA is expected in the $61.0-$64.0 million band.

Zacks Rank & Other Stocks to Consider

Currently, El Pollo Loco carries a Zacks Rank #2 (Buy). Some other top-ranked stocks in the same space include BJ's Restaurants, Inc. (BJRI - Free Report) , Wingstop Inc. (WING - Free Report) and Carrols Restaurant Group, Inc. (TAST - Free Report) . BJ's Restaurants and Carrols Restaurant sport a Zacks Rank #1 (Strong Buy), whereas Wingstop has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

BJ's Restaurants has an impressive long-term earnings growth rate of 15.3%.

Carrols Restaurant Group has long-term earnings growth rate of 20%.

Wingstop reported better-than-expected earnings in the trailing four quarters, with an average beat of 16.2%.

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