William Blair analyst Sharon Zackfia weighs in on several popular restaurants including Chipotle Mexican Grill, Inc. (NYSE:CMG), Shake Shack Inc (NYSE:SHAK), and El Pollo LoCo Holdings Inc (NASDAQ:LOCO) before earnings. Overall, the analyst expects Q4 same-store sales figures to be down compared to the previous quarter, but notes that several winners and losers will emerge.


Chipotle Mexican Grill, Inc.

The fast-casual Mexican food chain is set to report earnings on Tuesday, February 2 after market close. Zackfia estimates the company will post Q4 EPS of $1.90, marking a 51% year-over-year decrease. The analyst acknowledges that food safety will be the main topic of the company’s earnings report as it continues to deal with foodborne illness outbreaks linked to its restaurants.

As a result of the virus outbreaks associated with Chipotle locations, the analyst acknowledges that the company already announced a 14.6% same-store sales decrease, year-over-year. In addition, she expects “a lack of visibility on the pace of an eventual same-store sales rebound.” Zackfia explains, “We continue to anticipate that same-store sales will progressively improve in 2016 after hitting bottom in the first quarter in the -20% to -25% range, and project an inflection to positive territory in the second half of the year.”

Zackfia concludes, “While it is still unclear how quickly Chipotle can recapture customer trust and frequency, history has taught us that sales softness related to foodborne illnesses tends to be short in duration. Moreover, we believe opportunity exists for the company to shore up sales more quickly by going on the offensive with marketing in the near term.” The analyst currently has an Outperform rating on the stock with no price target.

According to analysts polled by TipRanks in the last 3 months, 12 analysts are bullish on Chipotle, 14 are neutral, and 2 remain bearish. The average 12-month price target between these 28 analysts is $536.77, marking a 16% potential upside from current levels.

CMG Consensus


Shake Shack Inc

Ahead of Q4 earnings, Zackfia is upgrading Shake Shack to Outperform due to its valuation compared to its peers. She explains, “While still the richest valuation in restaurants, Shake Shack’s premium has narrowed substantially versus its peer group, and we now see the opportunity for strong earnings growth with likely upside to more than offset any further potential valuation compression.”

The company will post earnings in late February. The analyst believes the company will post EPS of $0.09 and more promising trends thanks to “favorable weather” in New York that has encouraged consumers to eat in its outdoor locations, which holds one-third of the company’s comp base. She continues, “Moreover, we believe the potential exists for significant revenue and earnings upside to 2016 estimates, given impressive sales momentum as well as the potential positive wildcard associated with last week’s national introduction of the Chick’n Shack.”

According to the 2 analysts polled by TipRanks in the last 3 months, 1 is bullish on the company and 1 is neutral.

SHAK consensus


El Pollo LoCo Holdings Inc

The Mexican food chain will release earnings in early March and the analyst expects the company to post EPS of $0.14, at the high end of the guidance range of $0.12 to $0.14. Furthermore, Zackfia expects a slight 0.3% increase in same-store sales, both company-owned and franchised.

El Pollo Loco opened 10 new company-owned locations in the quarter, just meeting the lower end of full-year development goals. Going forward, Zackfia notes, “For 2016, we believe the company will reiterate development guidance for 20 to 22 new company-owned locations and issue initial franchised development expectations encompassing our estimate of 10 new locations, yielding systemwide unit growth in the 6.0% to 6.5% range.”

Zackfia currently has an Outperform rating on the company without a price target. According to the 2 analysts polled by TipRanks in the last 3 months, 1 is bullish on the company while 1 remains on the sidelines. The average 12-month price target between these 2 analysts is $15.50, marking a 30% potential upside from current levels.

LOCO consensus