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Del Taco beats earnings, narrows revenue forecast

A customer orders at the drive-thru of a Del Taco restaurant in Gardena, California.
Patrick T. Fallon | Bloomberg | Getty Images

Del Taco Restaurants on Monday posted earnings that topped analysts' estimates and narrowed its revenue forecast to the top end of the range, helped in part by the popularity of The Del Taco.

The Del Taco, a bigger, crunchier version of its beef taco, launched in June and was the company's most successful menu introduction in its history, Paul Murphy, president and CEO of Del Taco, told CNBC. The company sold more than 11 million of the items in 550 stores since June.

Murphy added that Del Taco's success wasn't just about the innovation, but also its dedication to guest experience.

"We try to keep it simple," he said. "Keep it as authentic as we can. We are not into over-the-top novelty items. We want to make sure that the things that we do resonate with people; that they are affordable and, frankly, satisfying."

The restaurant posted third-quarter earnings per share of 13 cents on revenue of $104.4 million, outpacing Wall Street's expectations. Analysts expected earnings of 12 cents per share on revenue of $101.6 million, according to Thomson Reuters consensus estimates.

Del Taco also narrowed its fiscal year 2016 revenue forecast to a range of $446 million to $449 million, in line with StreetAccount's estimates. Previously, the company expected revenue this fiscal year to reach between $439 million and $449 million.

Unlike other rivals, it looks like low grocery prices and uncertainty over the coming election had little impact on its quarter.

The chain saw same-store sales grow 6.7 percent in the quarter, nearly double the 3.9 percent gain Wall Street was expecting, according to StreetAccount.

In addition, company-owned stores saw same-store sales rise 7.1 percent, higher than analyst estimates of 4 percent reported by StreetAccount.

"Our feeling is that once the election is done, that certainty should bolster consumer confidence and so if it has been a headwind for people, we think just getting the election over and having someone in place should take care of that," Murphy said.

He noted that Del Taco has "strong affordability" and is able to compete well with the grocery channel.

Del Taco expects system-wide same-store sales will grow at the high-end of its prior forecast for 2.5 percent to 4.5 percent growth.