Update: El Pollo Loco Earnings; Why The Stock Will Get Its Chicken Smoked

Sep. 5.14 | About: El Pollo (LOCO)

Summary

El Pollo Loco reported second quarter earnings that were in line with analyst estimates.

The earnings results needed to blow the estimates away in order to be another Chipotle Mexican Grill. They didn’t. This confirms my bearish opinion.

I actually expected better earnings than this.

El Pollo Loco (NASDAQ:LOCO) reported its second fiscal quarter earnings which was the first report as a public company. Revenue inched 6.3% to $86.9 million, very close to the estimate. Adjusted EPS came in at $0.16, right at the estimate, and was a 10% gain year-over-year. System-wide same-store sales popped 5.4% which was the second-lowest quarterly gain in 10 quarters.

These numbers aren't terrible by any means, but they are certainly nothing to get excited about. El Pollo Loco continues to have a Chipotle Mexican Grill (NYSE:CMG) type of valuation (actually more lofty) but lacks by a long shot Chipotle-like growth. In my most recent El Pollo Loco article entitled To See Just How Loco El Pollo Loco's Valuation Is, Look At Popeyes, I compared El Pollo Loco's crazy valuation to Popeyes Louisiana Kitchen (NASDAQ:PLKI). I said,

"El Pollo Loco is going to need to some show some astronomical existing-store sales growth for its valuation to justify more than 5 times that of Popeyes especially since, again, Popeyes unit numbers are growing faster."

Not only is the existing-store sales growth anything but astronomical, but the company didn't offer anything in the way of guidance for investors to expect much different going forward. I believe El Pollo Loco is only trading on IPO hype fumes at this point as the story, never mind the fundamentals, is running out of steam of fast.

Disclosure: The author is short LOCO.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I have both call and put options in El Pollo Loco.