Why Portillo's Stock Was Sizzling Hot Tuesday Morning

Shares of Portillo's (NASDAQ: PTLO) charged out of the gate Tuesday morning, jumping as much as 12.7%. As of 11:32 a.m. ET, the stock was still up 9.6%.

The catalyst that sent the fast-casual restaurant stock higher was the company's financial results, which were better than expected.

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Tasty results

For the fourth quarter, Portillo's generated revenue of $184.6 million. While that represented a year-over-year decrease of 1.7%, it wasn't an apples-to-apples comparison. Because of the way the calendar fell, the prior-year quarter had 14 weeks, compared to 13 weeks in the just-reported Q4.

Even more telling was net income of $12.4 million, which increased 29%. This resulted in adjusted earnings per share (EPS) of $0.17, well ahead of analysts' consensus estimates of $0.07.

Fueling the surprisingly positive results was a turnaround in same-store sales, which increased 0.4% year over year, after declining in each of the past three quarters. At the same time, restaurant-level earnings before interest, taxes, depreciation, and amortization (EBITDA) decreased 1.1% to $45.2 million, also impacted by the shorter quarter.

The company added six new locations in the fourth quarter, continuing its measured expansion.

It's the economy

Historically high inflation over the past couple of years has made it difficult for restaurant operators, and Portillo's is no different. High commodity prices and rising labor costs have weighed on operations, while consumers struggled with less discretionary income.

Despite those challenges, Portillo's saw an increase in average check size, partially offset by fewer transactions. The increase in same-store sales was a testament to the company's strategy of keeping prices low, which will generate customer loyalty over the long term.

Furthermore, Portillo's continues to outperform its peers in average unit volume, generating sales of $9.1 million per location, outperforming all its peers in the fast-food space.

Portillo's continues to focus on the basics, positioning itself for further success once inflation is in the rearview mirror.

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Danny Vena has positions in Portillo's. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.