Del Taco Restaurants Inc TACO reported fourth-quarter results that fell short of expectations and management's 2019 guidance disappointed investors.
The Analyst
Wedbush's Nick Setyan maintains an Outperform rating on Del Taco with a price target lowered from $15 to $14.
The Thesis
Del Taco prenanounced system same-store sales growth of 1.9 percent, Setyan said in a research report.
During the quarter, the company bought back 765,000 shares of its own stocks and 21,00 warrants were repurchased. The current buyback authorization has $29.6 million remaining, so Setyan said investors can expect repurchases to continue.
System same-store sales growth so far in the first quarter is slightly negative versus expectations for flat. Setyan said the company could see an acceleration in same-store sales growth in the second quarter from improving weather, continued focus on value, and new benefits from third party delivery options.
Del Taco should end fiscal 2019 with a 1.9-percent system same-store sales growth. Beyond that, the company should see EBITDA growth in 2020 due to a higher comp run-rate, lower food input costs and the potential for G&A leverage.
Price Action
Del Taco's stock was trading lower by 7.5 percent at $9.79 per share Tuesday afternoon.
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