Why Investors Are Eating Up El Pollo Loco Earnings

El Pollo Loco Holdings, Inc. (NASDAQ: LOCO) reported first quarter financial results after markets closed Thursday. The company said that it had $0.16 in EPS and $99.8 million in revenue. The consensus estimates form Thomson Reuters called for $0.14 in EPS and $98.72 million in revenue. The same period from last year had $0.17 in EPS and $94.35 million in revenue.

System-wide comparable restaurant sales declined 0.3%, including a 0.4% decrease for company-operated restaurants, and a 0.2% decrease for franchised restaurants. This decline was driven by a 2.2% decline in transactions, partially offset by a 1.9% increase in average check.

Restaurant contribution was $19.0 million or 20.3% of company-operated restaurant revenue, compared to $18.3 million, or 20.7% of company-operated restaurant revenue in the first quarter of 2016. The decline in restaurant contribution margin was primarily the result of higher labor costs and higher occupancy and other operating expenses associated with new restaurants opened in 2016 and 2017.

In terms of guidance for the full year, El Pollo Loco expects to see EPS in the range of $0.65 to $0.69, with comparable sales growth of flat to 2.0%. The consensus estimates are calling for $0.66 in EPS and $406.88 million in revenue for the 2017 full year.

Steve Sather, President and CEO of El Pollo Loco, commented:

While we are not satisfied with our sales performance, we are pleased with the progress we’ve made since the end of February in the face of industry headwinds.  We believe that our strategy of highlighting our differentiated product and authentic brand, while enhancing our strong value equation, will create both top and bottom line growth.  Drivers such as our new advertising campaign, technology initiatives focused on convenience and loyalty, and our focus on reinforcing the value proposition of our family meals, are all aimed at generating traffic and strengthening our brand.

Shares of the crazy chicken closed Thursday up 0.8% at $12.50, with a consensus analyst price target of $14.40 and a 52-week trading range of $10.08 to $14.60. Following the release of the earnings report, the stock was up 4% at $13.00 in the after-hours trading session.