El Pollo Loco (LOCO): NDR Indicates SSS Could Rise On Lower Hurdles - Jefferies
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Jefferies analyst, Andy Barish, reiterated his Buy rating on shares of El Pollo Loco (NASDAQ: LOCO) after taking the CEO Steve Sather and CFO Larry Roberts on a non deal roadshow.
The analyst pointed out that LOCO is successfully lapping easier compares with positive sss and traffic in 3Q (which also occurred in 2Q results). The analyst believes that operational improvements, brand positioning and a healthy CA restaurant sss environment are all helping drive sss. The company is currently running a Chicken tenders promotion, which is also acting as a test for this new product.
The analyst saw the new "Vision" design in Dallas, which tries to elevate the look and feel of the brand to match the food quality. All Dallas stores are being built with the new design on company-owned and franchised. LOCO should have about 6 units in the Dallas Ft Worth Area by year end and they appear off to a good start. The "Vision" design is also being evaluated for possible remodels in the medium term.
No change to the price target of $16. At 17x Earnings and 8.5x EV/EBITDA consensus, the analyst believes LOCO stock is attractive for small cap "core" investors.
Shares of El Pollo Loco closed at $13.18 yesterday.
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