El Pollo Loco Holdings (NASDAQ: LOCO)
Earnings Report
On Thursday after the close El Pollo Loco (LOCO) reported second quarter earnings that sent the shares into a nosedive in post market trading. LOCO released earnings of 19 cents per share on $89.5 million in revenue while analysts were expecting earnings of 18 cents per share on revenue of $92.96 million in revenue. The miss in revenue wasn’t really that bad but the market took the opportunity to punish LOCO and sent shares tumbling. Along with coming up short on revenues, the company also lowered guidance for the remainder of 2015. According to the release, LOCO is lowering comparable sales growth to 3% from a range of 3-5%, reducing the estimated new franchised stores to be opened from 11 to 8, and lowering adjusted EBITDA to $65-67 million versus $66.5-69.2 million. El Pollo Loco
Even though they lowered their full year guidance the company still remains upbeat and expects healthy growth to continue. El Pollo Loco CEO Steve Sather said in a statement with the release of earnings:
“We continue to be excited about the opportunity to expand in both new and existing markets, and our new restaurant pipeline continues to strengthen. We look forward to bringing our delicious Fire-Grilled Chicken and authentic Mexican inspired entrees to consumers across the country craving healthier and flavorful meals.” TheStreet
Currently, LOCO is only operating in Arizona, California, Nevada, Texas, and Utah. That’s only five states, which leaves plenty of room for growth and expansion across the rest of the country and even though 2015 has been a rough year for LOCO so far, I think the share price has been driven down to levels that are starting to look overextended and attractive for a possible bounce.
Technicals
LOCO opened the year up at $20.00 per share and has since been a bit of a choppy stock to trade. Not until Q1 earnings in May, which sent the shares down almost 14% overnight, did share prices finally make a serious move and begin a new trend south. This triggered a strong sell off that has continued for most of the summer and into this latest earnings release where share prices found an all time low of $14.55. The technical’s for LOCO look terrible as all major moving averages are pointing down and the Relative Strength Index is sitting around the 25 range, indicating weakness in the stock.
Overall, LOCO’s share price has been all over the map. Since its IPO opening price of $19.00 in July of last year it has reached highs of $41.70 and slowly stair-stepped down to the low teens in just a year. That’s more than a 65% swing to the downside. Daily levels are pretty clean and looks like $19 and $20 are going to be big resistance levels to watch out for. Since it’s trading at all time lows it’s hard to say where the support is going to come in at but expect it to be around round numbers like $14 or $13 for example. I would like to see some consolidation at the current levels and then a breakout before making any kind decision on which way to trade it.
Company Profile
El Pollo Loco Holdings, Inc. operates as a holding company with interest in managing restaurants. It operates through its subsidiary, El Pollo Loco, Inc. develops, franchises, licenses and operates quick-service restaurants under the name El Pollo Loco. The company specialize in flame-grilled chicken in a wide variety of contemporary mexican-influenced entrees, including specialty chicken burritos, chicken quesadillas, chicken tortilla soup, pollo bowls and pollo salads. El Pollo Loco Holdings was founded in 1975 and is headquartered in Costa Mesa, CA. MarketWatch
