BTIG Cuts Estimates for Chipotle Mexican Grill, Inc. (CMG) Following Norovirus Incident


BTIG analyst Peter Saleh is out with a research note on shares of Chipotle Mexican Grill, Inc. (NYSE:CMG), reducing his 2017 and 2018 same-store sales and EPS estimates. The reason? The burrito chain was forced to close a restaurant in Sterling, Virginia, due to norovirus concerns.

The analyst reduced his 3Q17 and 4Q17 same-store sales estimates to 4.5% and (2.0%) from 8.0% and 2.0%, respectively. The reduction results in a decrease in 3Q17 and 4Q17 EPS to $2.00 and $1.76, from $2.44 and $2.23, respectively. Saleh’s 2017 EPS estimate is now $7.48, down from $8.38 and well below management’s goal of $10.00, while 2018 is now $10.94 from $12.09.

Saleh stated, “While the issue may be contained to just the one location, news of the incident is not, spreading beyond financial publications to widely disseminated media sources like CNN. While norovirus does not come from the food supply, we believe customers will take little comfort in that distinction and some will likely avoid Chipotle at least in the near-term. While the same-store sales impact is still unknown, we believe the repetitive and seemingly unavoidable nature of these incidents will reduce the multiple investors are willing to place on the shares. Furthermore, Chipotle may need to invest more resources in preventing future outbreaks while the ability to take menu pricing is delayed following this latest outbreak.”

As such, Saleh reiterates a Neutral rating on Chipotle shares, without providing a price target (To watch Saleh’s track record, click here).

Out of the 25 analysts polled by TipRanks (in the past 3 months), 7 rate Chipotle’s stock a Buy, 14 rate the stock a Hold and 4 recommend to Sell. With a return potential of 22%, the stock’s consensus target price stands at $455.05.