Chipotle Mexican Grill Inc.
) recently announced the approval of a new stock repurchase
program of $100 million of its common stock. This share buyback,
to be conducted through the first quarter of 2013, upholds the
company's trend of returning wealth to its shareholders from time
CHIPOTLE MEXICN (CMG): Free Stock Analysis
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YUM! BRANDS INC (YUM): Free Stock Analysis
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Chipotle also announced that $25 million of the authorized
repurchases will be conducted through a privately negotiated
accelerated share repurchase transaction or ASR, with Morgan
Stanley. The remaining $75 million will be available for
Chipotle's existing open-market repurchase agreement.
This latest authorization is in addition to the existing $100
million buyback plan announced on October 18, 2012. The company
has already successfully repurchased shares worth $40 million
under the authorization in October.
Chipotle ended the quarter with cash and cash equivalents of
$421.1 million and shareholders' equity of $1,307.6 million. Its
healthy balance sheet position and positive free cash flow
support the buyback program. Over the past four years, Chipotle
bought back a total of $388 million of stock at an overall
average share price of $117.
One of Chipotle's competitors,
), has also been consistently enhancing shareholders' returns. In
the third quarter of 2012, McDonald's returned $1.3 billion to
its shareholders through share repurchases and dividend payments.
In 2012, the company expects to return $5.5 billion through share
repurchases and dividend payment to shareholders.
Yum! Brands Inc.
), also recently authorized additional repurchase of up to 1
billion of its common stock, through May 31, 2014.
The increase in share buyback authorization reflects the
company's confidence in its fundamentals. At the same time, the
share buyback will help the company reduce the share count,
thereby increasing earnings per share and return on equity.
Apart from bolstering shareholders' value, this strategic move
will also lift the relatively undervalued share price. Chipotle's
shares are trading at $274.34 per share as on November 23, 2012,
which is way behind its 52-week high price of $442.40. In such
scenario, the share buyback will likely drive the stock price.
Chipotle currently carries a Zacks #3 Rank, which translates into
a short-term 'Hold' rating. We are maintaining our long-term
'Outperform' recommendation on the stock.