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

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

  • Revenue increased 12.2% to $1.2 billion
  • Comparable restaurant sales increased 2.6%
  • Restaurant level operating margin was 28.3%, a decrease of 50 basis points
  • Net income was $144.9 million, an increase of 10.8%
  • Diluted earnings per share was $4.59, an increase of 10.6%
  • Opened 53 new restaurants

Highlights for the nine months ended September 30, 2015 as compared to the nine months ended September 30, 2014 include:

  • Revenue increased 15.3% to $3.5 billion
  • Comparable restaurant sales increased 5.5%
  • Restaurant level operating margin was 27.9%, an increase of 50 basis points
  • Net income was $407.7 million, an increase of 25.8%
  • Diluted earnings per share was $12.92, an increase of 25.6%
  • Opened 150 new restaurants

“Chipotle’s third quarter results demonstrate the continued success of our vision to change the way people think about and eat fast food. As we have grown our restaurants through the year, we are able to push our standards higher in what we can accomplish with our food culture. We have currently returned carnitas to 90% of our restaurants, and will look to bring it back to 100% of restaurants during the fourth quarter. I am grateful for our customers’ continued support of our animal welfare standards, and want to thank them for their patience while we have worked hard to address this issue. I am confident that we have the right food culture and people culture in place for us to continue our momentum,” said Steve Ells, founder, chairman and co-CEO of Chipotle.

Third quarter 2015 results

Revenue for the quarter was $1.2 billion, up 12.2% from the third quarter of 2014. The growth in revenue was driven by new restaurants not in the comparable base and a 2.6% increase in comparable restaurant sales. Comparable restaurant sales growth was driven primarily by an increase in customer visits, and to a lesser extent from a menu price increase taken in certain markets in the third quarter of 2015.

We opened 53 new restaurants during the quarter, bringing the total restaurant count to 1,931.

Food costs were 33.0% of revenue, a decrease of 130 basis points as compared to the third quarter of 2014, as a result of relief in avocado and dairy prices and the benefit of our menu price increase, partially offset by increased beef and packaging costs.

Restaurant level operating margin was 28.3% in the quarter, a decrease of 50 basis points from the third quarter of 2014. The decrease was primarily driven by increased labor costs, and higher marketing and promotion costs, partially offset by lower food costs as a percent of revenue.

General and administrative expenses were 5.8% of revenue, a decrease of 80 basis points due to costs in the third quarter of 2014 associated with our biennial All Managers’ Conference, and lower bonus and non-cash stock-based compensation expense in the third quarter of 2015, partially offset by higher wages as we grew.

Net income for the third quarter of 2015 was $144.9 million, or $4.59 per diluted share, compared to $130.8 million, or $4.15 per diluted share, in the third quarter of 2014.

Results for the nine months ended September 30, 2015

Revenue for the first nine months of 2015 was $3.5 billion, up 15.3% from the first nine months of 2014. The growth in revenue was driven by new restaurants not in the comparable base and a 5.5% increase in comparable restaurant sales. Comparable restaurant sales growth was driven primarily by an increase in average check, which includes the benefit of menu price increases, and to a lesser extent increased traffic.

We opened 150 new restaurants during the first nine months of 2015, bringing the total restaurant count to 1,931.

Food costs were 33.3% of revenue, a decrease of 120 basis points as compared to the first nine months of 2014, 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.

Restaurant level operating margin was 27.9% for the first nine months of 2015, an increase of 50 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 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 first nine months of 2015 was $407.7 million, or $12.92 per diluted share, compared to $324.1 million, or $10.29 per diluted share, in the first nine months of 2014.

“At Chipotle, each of us is rewarded based on our ability to make the people around us better. We are proud that our restaurant teams understand this, and continue to find the most capable people, and elevate them to be top performers who are committed to creating Restaurateur teams. This culture is inspiring to our people, and leads to excellent restaurant operations, and a terrific guest experience. As we approach 2,000 restaurants, I’m excited to watch our top performers become the next wave of leadership at Chipotle,” said Monty Moran, co-CEO of Chipotle.

Outlook

For 2015, management expects the following:

  • We are increasing our guidance to 215-225 new restaurant openings, up from 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%

For 2016, management expects the following:

  • 220-235 new restaurant openings
  • Low-single digit comparable restaurant sales increases
  • An effective full year tax rate of approximately 38.7%

Definitions

The following definitions apply to these terms as used throughout this release:

Comparable restaurant sales represent the change in period-over-period sales for restaurants in operation for at least 13 full calendar months.

Average restaurant sales refers to the average trailing 12-month sales for restaurants in operation for at least 12 full calendar months.

Restaurant level operating margin represents total revenue less restaurant operating costs, expressed as a percent of total revenue. (Original Source)

Shares of Chipotle Mexican Grill are down 4.29% to $676.55 in after-hours trading. CMG has a 1-year high of $758.61 and a 1-year low of $597.33. The stock’s 50-day moving average is $725.27 and its 200-day moving average is $677.47.

On the ratings front, Chipotle has been the subject of a number of recent research reports. In a report released yesterday, Maxim Group analyst Stephen Anderson maintained a Hold rating on CMG, with a price target of $810, which implies an upside of 12.9% from current levels. Separately, on October 14, RBC’s David Palmer reiterated a Buy rating on the stock and has a price target of $825.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Stephen Anderson and David Palmer have a total average return of 15.2% and 15.1% respectively. Anderson has a success rate of 75.0% and is ranked #96 out of 3793 analysts, while Palmer has a success rate of 79.5% and is ranked #92.

Overall, 4 research analysts have assigned a Hold rating and 7 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $779.00 which is 8.6% above where the stock opened today.

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.