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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.

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