El Pollo Loco's (LOCO) Q4 Earnings & Revenues Top, Shares Up

El Pollo Loco Holdings, Inc. (NASDAQ:LOCO) reported better-than-expected results in the fourth quarter of 2017.

Pro-forma earnings of 11 cents per share surpassed the Zacks Consensus Estimate of 10 cents by 10%. Earnings, however, fell 8.3% from the year-ago level, partly due to high expenses related to the impairment of assets.

Total revenues increased 2.9% year over year to $95.2 million and surpassed the consensus estimate of $95 million. The revenue growth was primarily driven by an increase in company-operated restaurants sales.

The company’s aggressive sales building efforts like relentless focus on providing excellent service, reasonable pricing and advertising campaigns have favored the top-line growth. However, high costs related to the execution of various sales-building initiatives have kept profits under pressure.

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

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

Despite the earnings miss, the company’s revenue driving initiatives and subsequent growth might have had encouraged investors as the its shares have jumped 7.3% in after-hours trading, post the company’s earnings released on Mar 8.

Notably, El Pollo Loco’s shares have lost 15.4% in the past year, underperforming the industry’s gain of 13.2%.

Let’s delve deeper into the numbers.

Sales Discussion

Company-operated restaurant revenues in the fourth quarter increased 3.3% from the year-ago quarter to $89.3 million, driven by the opening of 24 new restaurants during and after the fourth quarter of 2016. However, five restaurants were closed down during the same time period that somewhat affected the company-operated restaurant revenues.

Comps at the company-operated restaurants increased 0.9% in the quarter, driven by 1.9% growth in average check, partially offset by 1% decline in transactions.

Fourth-quarter franchise revenues decreased 1.5% year over year to $5.9 million due to a fall in franchise and development agreement fees but was partially offset by the contribution from 14 new restaurants opened during and subsequent to the fourth quarter of 2016. A 1.9% increase in franchise comps also positively affected franchise revenues.

System-wide comps increased 1.4% from the prior-year quarter.

Expenses, Adjusted EBITDA and Net Income

Total expenses in the fourth quarter amounted to $104.9 million, up 15.8% from the year-ago quarter. The rise in expenses was largely due to 23% increase in general and administrative expenses.

Also, during the quarter, the company recorded a $16.4 million expense related to the impairment of the assets of 11 restaurants in Texas and one in Arizona, net of closed-store reserve.

Adjusted EBITDA (Expense Before Interest Tax Depreciation Amortization) in the quarter came in at $13.4 million, a 6.3% year-over-year decline.

Net loss in the fourth quarter of 2017 was $38 thousand against net income of $0.4 million in the fourth quarter of 2016.

Balance Sheet

Cash and cash equivalents as of Dec 27, 2017 totaled $8.6 million, up from $2.2 million as of Dec 28, 2016. Total debt by the end of 2017 was $93.3 million, down from $104.5 million at the end of 2016.

Stockholders’ equity amounted to nearly $275 million as of Dec 27, 2017, compared with $265.2 million as of Dec 28, 2016.

2018 Guidance

El Pollo Loco expects 2018 pro-forma net income per share in the range of 68 cents to 73 cents.

System-wide comps growth is projected to be flat, compared with 2017. The company plans to open six to eight company-owned and franchised restaurants.

Adjusted EBITDA is expected in the range of $61.0-$64.0 million.

Zacks Rank & Peer Releases

El Pollo Loco carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Chipotle Mexican Grill (NYSE:CMG) posted mixed fourth-quarter 2017 results, with adjusted earnings of $1.34 per share, surpassing the consensus estimate of $1.32 by 1.5%. Earnings also grew 143.6% year over year on lower costs and higher revenues.

McDonald's (NYSE:MCD) reported fourth-quarter 2017 adjusted earnings per share (EPS) of $1.71, beating the consensus mark of $1.59 by 7.5%. Earnings improved 19% from the year-ago quarter (16% in constant currency). The upside reflects strong operating performance and G&A savings.

Domino’s (NYSE:DPZ) fourth-quarter 2017 earnings matched the Zacks Consensus Estimate while revenues missed the same. Adjusted earnings came in at $1.94 per share and improved 31.1% from the year-ago quarter on higher net income and lower share count, as a result of share repurchases.

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