Stock Update (NYSEARCA:CMG): Chipotle Mexican Grill, Inc. Announces Second Quarter 2015 Results


Chipotle Mexican Grill, Inc. (NYSE:CMG) reported financial results for its second quarter ended June 30, 2015.

Highlights for the second quarter of 2015 as compared to the second quarter of 2014 include:

  • Revenue increased 14.1% to $1.2 billion
  • Comparable restaurant sales increased 4.3%
  • Restaurant level operating margin was 28.0%, an increase of 70 basis points
  • Net income was $140.2 million, an increase of 27.1%
  • Diluted earnings per share was $4.45, an increase of 27.1%
  • Opened 48 new restaurants

Highlights for the six months ended June 30, 2015 as compared to the prior year include:

  • Revenue increased 17.0% to $2.3 billion
  • Comparable restaurant sales increased 7.1%
  • Restaurant level operating margin was 27.7%, an increase of 100 basis points
  • Net income was $262.8 million, an increase of 36.0%
  • Diluted earnings per share was $8.34, an increase of 35.8%
  • Opened 97 new restaurants

“We feel good about our second quarter results, as our revenue, average restaurant sales, and comparable restaurant sales have continued to grow even comparing to a very strong 2014. The strength of our business is the product of our unique food culture and unique people culture, and we constantly find ways to improve, and overcome challenges we encounter – whether that means non-GMO ingredients, adding new pork suppliers to ensure food with integrity, or reinventing the way tortillas are made at scale. Our relentless focus on the key drivers of our business allows us to continue to change the way people think about and eat fast food,” said Steve Ells, founder, chairman and co-CEO of Chipotle.

Second quarter 2015 results

Revenue for the quarter was $1.2 billion, up 14.1% from the second quarter of 2014. The growth in revenue was driven by new restaurants not in the comparable base and a 4.3% increase in comparable restaurant sales. Comparable restaurant sales growth was driven primarily by an increase in average check, which includes the benefit of a nationwide menu price increase that was fully rolled out during the second quarter of 2014.

We opened 48 new restaurants during the quarter, bringing the total restaurant count to 1,878.

Food costs were 33.1% of revenue, a decrease of 150 basis points, as a result of the impact of our menu price increase, as well as relief in dairy and avocado prices, partially offset by increased beef and packaging costs as compared to the second quarter of 2014.

Restaurant level operating margin was 28.0% in the quarter, an increase of 70 basis points from the second quarter of 2014. The increase was primarily driven by favorable sales leverage, offset by increased labor costs as a percent of revenue.

General and administrative expenses were 5.9% of revenue, a decrease of 120 basis points due to lower non-cash stock based compensation expense, and lower bonus costs, partially offset by higher wages as we grew.

Net income for the second quarter of 2015 was $140.2 million, or $4.45 per diluted share, compared to $110.3 million, or $3.50 per diluted share, in the second quarter of 2014.

Results for the six months ended June 30, 2015

Revenue for the first six months of 2015 was $2.3 billion, up 17.0% from the first six months of 2014. The growth in revenue was driven by new restaurants not in the comparable base and a 7.1% increase in comparable restaurant sales. Comparable restaurant sales growth was driven primarily by an increase in average check, which includes the benefit of a nationwide menu price increase that was fully rolled out during the second quarter of 2014, and to a lesser extent increased traffic.

We opened 97 new restaurants during the first six months of 2015, bringing the total restaurant count to 1,878.

Food costs were 33.5% of revenue, a decrease of 100 basis points, which was lower as a result of the benefit of our menu price increase and relief in dairy and avocado prices, partially offset by increased beef and packaging costs as compared to the first half of 2014.

Restaurant level operating margin was 27.7% for the first six months of 2015, an increase of 100 basis points from the prior year. The increase was primarily driven by favorable sales leverage, partially offset by higher labor costs as a percent of revenue.

General and administrative expenses were 5.8% of revenue, a decrease of 150 basis points due to lower non-cash stock based compensation expense, and lower bonus costs, partially offset by higher wages as we grew.

Net income for the first half of 2015 was $262.8 million, or $8.34 per diluted share, compared to $193.3 million, or $6.14 per diluted share, in the first half of 2014.

“We consistently deliver this strong performance because of our amazing people culture, consisting of teams of top-performing employees who are empowered to achieve high standards. We are completely focused on strengthening this culture, by teaching people how to empower those around them to be at their best and developing leadership internally, and by making further investments in our teams, most recently by adding benefits for our hourly employees, including increased paid vacation and sick days and tuition reimbursement. Today, we have developed more top performing managers and crews than ever before, and our field leadership knows that their success arises only when they completely devote themselves to the betterment of the people around them,” said Monty Moran, co-CEO of Chipotle.

Outlook

For 2015, management expects the following:

  • New restaurant openings at or above the high end of the previously announced range of 190-205
  • Low-to-mid single digit comparable restaurant sales increases
  • An effective full year tax rate of approximately 38.7% (Original Source)

Shares of Chipotle Mexican Grill are down 5.31% to $642 following the earnings announcement. CMG has a 1-year high of $727.97 and a 1-year low of $582.69. The stock’s 50-day moving average is $619.90 and its 200-day moving average is $655.23.

On the ratings front, Chipotl has been the subject of a number of recent research reports. In a report issued on June 5, Wedbush analyst Nick Setyan maintained a Hold rating on CMG, with a price target of $620, which implies a downside of 8.6% from current levels. Separately, on May 28, Wunderlich Securities’ Robert Derrington reiterated a Hold rating on the stock and has a price target of $725.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Nick Setyan and Robert Derrington have a total average return of 17.0% and 15.7% respectively. Setyan has a success rate of 67.9% and is ranked #327 out of 3711 analysts, while Derrington has a success rate of 71.8% and is ranked #265.

The street is mostly Bullish on CMG stock. Out of 17 analysts who cover the stock, 11 suggest a Buy rating and 6 recommend to Hold the stock. The 12-month average price target assigned to the stock is $732.31, which implies an upside of 8.0% from current levels.

Chipotle Mexican Grill Inc operates Chipotle Mexican Grill restaurants, which serves a menu of burritos, tacos, burrito bowls (a burrito without the tortilla) and salads, made using fresh ingredients.