What's in the Cards for Chipotle (CMG) This Earnings Season?

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Chipotle Mexican Grill, Inc. CMG is scheduled to report second-quarter 2018 earnings on Jul 26, after market close.

In the last reported quarter, the company's earnings surpassed the Zacks Consensus Estimate by 38.3%. The bottom line also surpassed estimates in three of the trailing four quarters, with an average beat of 8.1%.

What to Expect?

The Zacks Consensus Estimate for the quarter under review is pegged at $2.78, which is higher than $2.32 reported in the year-ago quarter. Also, the consensus mark has witnessed a sharp upward revision of 10 cents over the past 30 days. The Zacks Consensus Estimate for revenues is nearly $1,261 million, up 7.9% from the prior-year actual figure.

Let's take a look at how the company's top and bottom line will shape up in the to-be-reported quarter.

Factors at Play

Chipotle's top line was up 7.4% in first-quarter 2018, which is likely to continue in the quarter to be reported as well. This upside can be attributed to increased comps and restaurant openings, various sales-building and strategic initiatives. Per the Zacks Consensus Estimate, second-quarter comparable sales are likely to witness growth of nearly 2.3%, up from 2.2% reported in first-quarter 2018.

Meanwhile, roll out of queso has substantially spurred sales of the company. Evidently, queso added 200 basis points (bps) to the average check in the first quarter of 2018. Additionally, Chipotle is prioritizing e-commerce program to gain customer confidence as a part of its digital innovation. The company is also aggressively trying to make digital ordering more appealing to customers and efficient for its restaurants in order to drive digital sales and regain customers. In this regard, Chipotle has redesigned and simplified its online ordering site, enabled online payment for catering, online meal customizations and collaborated with several well-known third-party providers for delivery.

Furthermore, Chipotle's focus on developing new food safety protocols is impressive. These protocols include DNA-based testing of several ingredients coupled with changes to food preparation and food handling practices. The company's enhanced focus on making better food accessible to everyone should also boost traffic in the to-be-reported quarter.

Chipotle Mexican Grill, Inc. Price, Consensus and EPS Surprise

Chipotle Mexican Grill, Inc. Price, Consensus and EPS Surprise | Chipotle Mexican Grill, Inc. Quote

Quantitative Model Prediction

Our proven model shows that Chipotle does not have the right combination of the two key ingredients - a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher - for increasing the odds of an earnings beat in the second quarter. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Earnings ESP : Chipotle has an Earnings ESP of -0.16%. Notably, Earnings ESP represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate.

Zacks Rank : Chipotle has a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks With Favorable Combination

Here are a few other stocks from the Restaurant space that investors may consider as our model shows that they have the right combination of elements to post an earnings beat in the second quarter:

The Wendy's Company WEN has an Earnings ESP of +1.59% and a Zacks Rank #2. 

Brinker International, Inc. EAT has an Earnings ESP of +2.03% and a Zacks Rank of 3.

The Cheesecake Factory Incorporated CAKE has an Earnings ESP of +1.10% and a Zacks Rank #3.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: CMG , CAKE , WEN , EAT

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