Leigh Drogen is the Founder and CEO of Estimize. Estimize is an open financial estimates platform which facilitates the aggregation of fundamental estimates from independent, buy-side, and sell-side analysts, along with those of industry experts, private investors and students. By sourcing estimates from a diverse community of individuals, Estimize provides both a more accurate and more representative view of expectations compared to sell side only data. Leigh started his career as a quant trader at Geller Capital, a White Plains, NY based fund where he ran strategies that looked at earnings acceleration and analyst estimate revision models, as well as price momentum and several sentiment indicators. Leigh later went on to be the founder of Surfview Capital, a New York based asset management firm that used many of the same strategies as Geller Capital, with a focus on higher beta names on an intermediate term time frame. His educational background includes focus in economics and international relations, specifically war theory. He is a graduate with honors from Hunter College in New York City. You can contact Leigh by emailing him at Leigh@estimize.com
Will Chipotle Mexican Grill, Inc. Continue Dominating the Fast Casual Segment? (CMG)
Investors’ favorite burrito joint, Chipotle Mexican Grill, Inc. (NASDAQ:CMG), will serve its first quarter earnings Tuesday after the closing bell. Chipotle has been the winner of the restaurant wars in recent years, but its seemingly untouchable dominance may be on the decline. With earnings and revenue growth expected to slow this quarter, can Chiptole maintain its spot as top dog among fast casual restaurants?
Chipotle’s identity as a quick and relatively inexpensive restaurant with a focus on sustainably raised non-GMO ingredients has boosted its appeal to customers and investors alike. Earlier this year several Chipotle locations pulled carnitas from their menus after Chipotle suspended a supplier for violating its pork raising standards. When Chipotle shuts down its carnitas operation you hear far more praise in the media than dissatisfaction from hungry diners.
Chipotle’s quick throughput times and overwhelmingly positive public image have resulted in a series of stunning financial performances through a period where fastfood incumbents such as McDonald’s Corporation (NYSE:MCD) and Yum! Brands, Inc. (NYSE:YUM) have struggled. Chipotle’s average single year stock return from 2010 to 2014 was a staggering 59%. During that period the Mexican restaurant chain’s fundamentals went into overdrive with annual revenue increasing from $1.84 billion to $4.11 billion. Yearly earnings per share more than doubled from $5.64 to $14.13.
Tuesday analysts on Estimize expect Chipotle’s explosive growth to show signs of fading. Contributors are forecasting a 23% improvement in revenues. That’s slightly less than Chipotle’s FQ1 of 2014, the slowest quarter of revenue growth last year which saw a 24% addition. The consensus from Estimize is that Chipotle will report $1.11 billion in sales. Wall Street’s estimate is only marginally lower (0.01%) at $1.10 billion.
On the bottom line Estimize contributors are looking for $3.66 in EPS while Wall Street is 5 cents (1.4%) behind at $3.61. Estimize contributors expect Chipotle to report a 39% year over year profit gain in the first quarter. Most companies doing over $1 billion in sales each quarter would be thrilled with 39% profit growth, but for Chipotle that rate of growth is less than its been in the past 2 quarters (56% and 52% sequentially).
Estimize contributors expect a small beat against this Wall Street consensus and overall this should be another solid quarter for Chipotle. But in all likelihood progress will not live up to the stellar performance standard set in recent periods.