Earnings: Del Taco Q4 revenue up 7.3%; stock falls on earnings miss

Fast food chain Del Taco Restaurants (TACO) reported higher earnings and revenues for the fourth quarter of fiscal 2018. Earnings missed the Wall Street forecast by a cent, while the top-line matched. The company’s stock dropped sharply during the extended trading session Monday.

Revenues of the California-based Mexican-American quick service restaurant climbed 7.3% annually to $157.3 million, which was broadly in line with the estimates. Comparable restaurant sales rose 1.9%, marking the 21st increase in a row, with strong contributions from both company-owned restaurants and franchises.

Adjusted profit rose to $7 million or $0.18 per share in the December quarter from $6.2 million or $0.16 per share in the prior-year period. Meanwhile, reported earnings dropped sharply to $0.15 per share from $0.89 per share in the fourth quarter of 2017.

Comparable restaurant sales rose 1.9%, with strong contributions from both company-owned restaurants and franchises

“As we move into 2019, we remain focused on our mission to be the leader in the value-oriented QSR+ segment. Our transaction driving initiatives are well underway as we enter 2019, led by our digital transformation including the new Del App which has now eclipsed 400,000 registered users and our expansion of Grubhub delivery to all company-operated restaurants,” said CEO John Cappasola.

Earlier this year, the company initiated optimization of its restaurant network through re-franchising. The initiative is expected to shift the current rate of 55% company ownership to about 45% by next year. During the three-month period, the management repurchased 765,209 shares for $11.05 per share and 20,596 warrants for $1.93 per unit.

For the whole of 2019, Del Taco anticipates generating revenues of $517-$527 million and restaurant contribution margin between 18.1% and 18.6%. Full-year earnings, on an adjusted basis, are expected to come in the range of $0.47 per share to $0.52 per share.

Related: Yum! Brands Q4 2018 Earnings Conference Call Transcript

The management is also looking for net capital expenditures of $42-$47 million. The outlook includes the acquisition of three high-volume restaurants and re-franchise of thirteen lower-volume restaurants, which were closed early this year.

Del Taco shares are currently trading close to the levels seen a year earlier. Having gained about 2% since the beginning of the year, the stock closed Monday’s regular session sharply higher but dropped in the after-hours session.

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