Despite these developments, the company is likely to meet at least the low end of its same-store sales and margin guidance, according to Wedbush.
Wedbush’s Nick Setyan maintained an Outperform rating on Del Taco while lowering the price target from $14 to $13.
Despite lower comps, Del Taco was able to report second-quarter EPS in-line with expectations, at 13 cents.
Management indicated a comp deceleration through the first three weeks of July. Despite the slower start to the third quarter, the analyst believes the company would be able to generate low-single-digit same-store sales growth through 2019, against easing comp in the back half of the year.
Management reiterated underlying margin guidance of 18.1%-18.6% and EBITDA of $66.5-$69 million. Setyan expects Del Taco to meet at least the low end of its margin and EBITDA guidance.
The analyst also expects the company to continue repurchasing shares, with $22.3 million remains on the current authorization of $75 million.
Setyan added that the estimates had not been revised, but the price target had been reduced “largely on lower peer multiples.”
Shares of Del Taco dropped more than 5.5% to close Tuesday at $12.13.
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