Morgan Stanley Reviews El Pollo Loco Earnings

In a report published Friday, Morgan Stanley analysts maintained an Equal-Weight rating on

, with a price target of $28. El Polo Loco reported its 1Q05 earnings in-line with expectations but disappointed on the comps front. "While still early in its new unit development story, LOCO didn't deliver the comp gains that investors had become used to for this still-young public company," the analysts said. "While running multiple, higher price point non-chicken limited time offers (LTOs) were blamed for confusing the customer and providing less incrementality than we'd seen in the past, it also underscores how LOCO has become dependent on these promotions to drive sales," the analysts pointed out. The company's lower-than-expected interest expenses in 1Q15 were attributable to a debt paydown and a refinance. Reduced interest expenses are expected to provide incremental benefits in the near future. The Modelware EPS estimates for 2015 and 2016 have been raised from $0.68 to $0.69 and from $0.79 to $0.80, respectively, to reflect lower interest expense.