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Wedbush Reiterates Outperform On Del Taco Following 'Strong' Q3, 'Solid' Outlook

  • Del Taco Restaurants, Inc. (NASDAQ: TACO) shares have risen 39.77 percent year to date, from a low of $9.70 on January 9.

  • Wedbush’s Nick Setyan has reiterated an Outperform rating on the company, while maintaining the price target at $20.

  • Following the robust Q3 results and the strong initial guidance for 2015, Setyan believes that the 2016 estimates could prove conservative.

“With increased investor awareness and earnings visibility, we believe TACO's current discount to QSR peers is poised to narrow,” the Wedbush report mentioned, while stating that “rising ROI, driven by category-leading unit-level profitability and SSS growth momentum, place TACO within striking distance of category-leading unit growth.”

Analyst Nick Setyan believes that the Q3 beat was driven by margin improvement and robust comps. The company reported its adjusted EPS for the quarter, as well as the adjusted EBITDA and co-owned and franchised same store sales growth ahead of the consensus and the estimates. Unit level margins also improved marginally ahead of the estimate.

“Comp momentum poised to continue, in our opinion,” Setyan said, while adding, “Given a carne asada platform rollout in Q4, we believe outsized mix benefit is poised to continue... Combined with our expectation for continued positive transactions, we believe comp guidance is likely to prove conservative.”

Setyan also believes that while the initial 2015 guidance is positive, it could prove to be conservative, while increased visibility offered by the 2016 guidance is likely to act as a positive catalyst.

The 2015 EPS estimate has been raised from $0.45 to $0.46 to reflect the 3Q15 results, while the 2016 EPS estimate has been raised from $0.60 to $0.61.

Latest Ratings for TACO

Oct 2015

Dougherty & Company

Initiates Coverage on

Buy

Sep 2015

Citigroup

Initiates Coverage on

Buy

Jun 2015

Wedbush

Initiates Coverage on

Outperform

View More Analyst Ratings for TACO
View the Latest Analyst Ratings

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