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Can El Pollo Loco (LOCO) Spring a Surprise in Q4 Earnings?

El Pollo Loco Holdings, Inc.LOCO is scheduled to report fourth-quarter and full-year 2016 numbers on Mar 9, after market close.

Last quarter, the company had posted a 5.26% negative earnings surprise. However, the trailing four-quarter average earnings surprise stands at a positive 2.53%.

Let's see how things are shaping up for this announcement.

El Pollo Loco Holdings, Inc. Price and EPS Surprise

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

Factors Likely to Influence this Quarter

This fire-roasted chicken specialist's fresh handcrafted Mexican inspired cuisine has been driving its popularity and ensuring a steady rise in traffic. El Pollo Loco's various sales-building initiatives, relentless focus on providing excellent service, a warm and inviting atmosphere, and reasonable pricing have been further boosting comps.

In fact, the third-quarter 2016 marked the company's 21st consecutive quarter of positive comps growth. We expect the trend to continue in the to-be-reported quarter as well. Moreover, menu innovation and solid unit development should drive revenues.

However, increasing labor costs as well as pre-opening costs of outlets and expenses related to sales initiatives might dent the quarter's profits. Moreover, a challenging sales environment in the overall restaurant space is likely to keep the top line under pressure.

Earnings Whispers

Our proven model does not conclusively show that El Pollo Loco is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.

Zacks ESP : El Pollo Loco has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 13 cents. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank : El Pollo Loco has a Zacks Rank #2, which increases the predictive power of ESP. However, the company's 0.00% ESP makes surprise prediction difficult.

Notably, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

GMS Inc. GMS has an Earnings ESP of +15.63% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

Fred's, Inc. FRED has an Earnings ESP of +21.05% and a Zacks Rank #3.

O'Reilly Automotive, Inc. ORLY has an Earnings ESP of +0.35% and a Zacks Rank #3.

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O'Reilly Automotive, Inc. (ORLY): Free Stock Analysis Report

Fred's, Inc. (FRED): Free Stock Analysis Report

El Pollo Loco Holdings, Inc. (LOCO): Free Stock Analysis Report

GMS Inc. (GMS): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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