The 'Del Taco' Taco Rollout Drives Del Taco's Q3 Beat

Shares of Del Taco Restaurants Inc TACO surged more than 10 percent after the company reported a third quarter EPS beat on better than expected same-store sales and lower food costs.

Del Taco's adjusted EPS/EBITDA of $0.14/$17 million came in ahead of expectations for $0.12 and about $15 million, respectively.

The restaurant’s same-store sales came in at 6.7 percent, also topping consensus view of 3.7 percent, following the successful re-launch/refresh of its “Combined Solutions” program and rollout of the new "Del Taco" taco.

“We think the brand is well positioned to compete in this kind of environment, and would be buyers of the stock, as fundamentals are improving & valuation attractive at 9x '17 EBITDA,” Jefferies analyst Andy Barish wrote in a note.

In addition, menu pricing ensured that the company’s check growth remains in the mid-single digit range. The company also saw positive menu mix on strong demand for both new premium, as well as value-oriented products.

Looking ahead, the company projects fourth quarter same store sales inline with the 4.4 percent year-to-date trend. For the full year, the company sees system-wide same-store sales growth at the high end of the previous 2.5 to 4.5 percent range and raised total revenue forecast to between $446-$449 million from prior range of $439-$449 million.

The company still sees full-year earnings per share of approximately $0.53 to $0.56. Barish‘s 16/17 EPS estimate remains unchanged at $0.55/$0.63.

Barish maintained its Buy rating on the stock and raised his price target by $2 to $16.

At time of writing, shares of Del Taco climbed more than 10 percent to $13.90.