Chipotle (NYSE: CMG) is a Denver, Colorado based restaurant chain that specializes in an assembly line production style of burritos and tacos. Chipotle boasts more than 1,600 locations around the US, Canada, and Europe with more on the way. It is known to some as a “fast food” chain although the company prides itself on using organic meats and maintaining transparency regarding its food sources. On Monday, October 20th Chipotle released its Q3 results, beating analysts’ expectations and sustaining profit momentum despite a slight increase in store prices.
During its Q3 results, Chipotle reported $4.15 earnings per share on a diluted basis, beating analysts’ consensus of $3.84 and achieving a 56% year-over-year increase. The popular chain earned revenue of $1.08 billion for the quarter, touting a 31% year-over-year increase and beating the consensus estimate of $1.06 billion. On average, analysts expect that Chipotle will post $13.75 earnings per share for the current fiscal year.
Chipotle executives attribute their success to the way in which Chipotle has altered the “fast food” dining experience. Co-CEO and founder Steve Ells noted, “the Chipotle model is resonating with customers, who are realizing there are better alternatives to traditional fast food. We believe these trends will continue, and that’s good for our customers and our shareholders.” On a similar note, co-CEO Monty Moran highlighted the teamwork and mutual respect responsible for Chipotle’s success: “We could not provide the quality of experience that our restaurants deliver or generate the results we do without having teams of top performers who are empowered to achieve high standards.”
Shares of Chipotle opened at $624.48 on Tuesday, October 21st. The Mexican food chain has a 1-year high of $697.93 and a 1-year low of $472.41. The stock’s daily moving average is $618.64 and it has a 50-day moving average of $661.04. The market cap for Chipotle is $18.84B and its P/E ratio is 53.57.
On Tuesday, October 21st Brian Bittner of Oppenheimer assigned Chipotle an Outperform rating with a $775 price target.Bittner noted, “3Q handily beat, but investors are anxious that the model’s ’15 bull-case is doomed from transitory food cost pressures. Any stock weakness should be bought, similar to 1Q’s overreaction on food margin worries… We remain buyers and would use weakness to add to positions.” Bittner has a 67% overall success rate recommending stocks with an average return of +12.8%.
Separately on October 21st, Andy Barish of Jefferies reiterated a Hold rating for Chipotle until “cost visibility improves.” He also noted, “Food costs will remain elevated in 4Q but should stabilize next year. In ’15, minimum wage & healthcare compliance should drive only modest headwinds, but we think it may be a challenge to drive the labor line much lower without impacting service/execution… Both food costs and G&A should normalize in ’15, but it’s tough to imagine CMG bumping up against 30% restaurant-margins – or driving significant upside to +/-20% earnings growth – on more modest SSS.” Barish has a 57% overall success rate recommending stocks with an average return of +3.9% per recommendation.
On average, the top analyst consensus for CMG is Moderate Buy.