Chipotle Mexican Grill Inc
(
CMG
) is slated to release its first quarter 2012 results on Thursday,
April 19. The current Zacks Consensus Estimate for the first
quarter is $1.92 per share, representing an annualized growth of
31.75%.
Earnings Surprise
With respect to earnings surprises over the last four quarters,
Chipotle has outperformed the Zacks Consensus Estimate in two
quarters and missed the same in the other two quarters. The
earnings surprise ranges from negative 5.36% to positive 2.70%,
with the average at negative 0.41%. This indicates that the company
has missed the Zacks Consensus Estimate by the same magnitude over
the last four quarters.
Previous Quarter Performance
Chipotle's fourth quarter 2011 earnings of $1.81 per share
missed the Zacks Consensus Estimate by a couple of cents but
improved from the year-earlier earnings of $1.47.
Revenues for the quarter shot up 23.7% year over year to $596.7
million and comparable store sales spiked up 11.1% in the quarter
under review, backed by higher traffic and menu price hike.
Restaurant operating margin expanded 20 basis points (bps) to
26.1%, attributable to a 100 bps cut in labor and 50 bps drop in
occupancy costs, partially offset by a 120-bps rise in food,
beverage and packaging costs and a 30-bps increase in other
operating costs (as a percentage of total revenue).
Outlook
For fiscal 2012, management expects mid-single-digit comparable
store sales growth and food costs to increase in the mid-single
digits sequentially.
Zacks Consensus
The analysts covered by Zacks expect Chipotle to post earnings
of $1.92 per share for the first quarter of fiscal 2012, higher
than the prior-year earnings of $1.46. Currently, the Zacks
Consensus Estimate ranges between $1.74 and $2.08 a share.
Estimate Revision Trend
The earnings outlook for Chipotle remains strong ahead of its
quarterly results. Estimates have moved up in the last 30 days,
implying that the analysts remain positive on the stock.
The current Zacks Consensus Estimate is $8.74 for 2012,
reflecting a year-over-year growth of 29.2%. The Zacks Consensus
Estimate for 2013 is $10.88, indicating an annualized growth of
24.5%. The estimate revision trends and the magnitude of such
revisions justify the strength in the stock.
Agreement of Estimate Revisions
In the last 30 days, out of the 20 analysts covering the stock,
four analysts increased their estimates while one analyst decreased
the same for the first quarter. Additionally, five out of the 22
analysts raised their estimates for fiscal 2012 and six out of the
22 analysts increased their estimates for fiscal 2013. None of the
analysts trimmed the estimates for fiscal 2013, but one analyst
moved in the opposite direction in 2012.
Over the last 7 days, no analysts made downward revisions, but
two analysts raised the estimates for the first quarter, 2012 and
2013 respectively.
The analysts have increased their estimates based on improving
traffic trends, strong operational focus and higher comparable
store sales growth expectations. Chipotle has remained unaffected
by the economic slowdown and has been able to deliver positive
comparable store sales consistently. Unit expansion, particularly
in international markets like Canada and U.K also remains
encouraging
The analysts also remain optimistic about Chipotle's focus on
expansion through new smaller prototype openings, named A-Model.
The company's first Asian themed restaurant called ShopHouse
Southeast Asian Kitchen in Washington; D.C is also performing very
well. The analysts view this concept to be an important long-term
growth driver for the company and hence in the second half of 2012,
Chipotle plans to open its second ShopHouse restaurant in the
Washington, DC market.
However, one analyst has reduced the estimate on
weaker-than-expected margins due to escalating input costs.
Moreover, the company currently has no plans for a systemwide price
increase despite input cost pressure
Magnitude of Estimate Revisions
The magnitude of estimate revisions for Chipotle has been quite
in significant over the last 30 days. Estimates for first quarter,
fiscal 2012 and 2013 have shot up by 2 cents, 3 cents and 5 cents
to $1.93, $8.74 and $10.88, respectively.
In the last 7 days, estimates shot up by a penny for the first
quarter, fiscal 2012 and 2013, respectively, implying that the
analysts expect Chipotle to post favorable results for the quarter
as consumer's spending power is driving the top line.
Our Take
We expect Chipotle to provide earnings above expectations as the
economy is improving.
We have a Neutral recommendation on Chipotle as it is well
positioned to expand rapidly while generating improved earnings
margins and returns on invested capital. With a strong balance
sheet, consistent earnings, healthy cash flow, excellent unit
economics, the successful 'Food With Integrity' program, and
continued marketing initiatives, we are of the opinion that the
stock provides relative safety and consistent growth.
We are also encouraged with Chipotle's international expansion
plan. The company sees future growth opportunities in Europe, and
hence is looking for sites in the U.K, Germany and France. The
company plans to open an outlet in Paris in spring this year and
two additional restaurants in London by second half of 2012.
However, Chipotle faces raging discount wars among quick service
operators and higher input cost along with increased general and
administrative expenses (G&A) may hurt its operating margins
and profits. Moreover, the company's customers remain sensitive to
macroeconomic factors, which may restrict their discretionary
spending, thereby negatively affecting the company's growth and
profitability.
CHIPOTLE MEXICN (
CMG
): Free Stock Analysis Report
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