Belus Capital's Brian Sozzi Previews Chipotle Mexican Grill's Q3 Results
Chipotle Mexican Grill, Inc. (NYSE: CMG) is set to report its third quarter results on Monday after market close. Analysts are expecting the popular fast-casual restaurant operator to earn $3.81 per share on comp growths of 16.9 percent.
Chipotle reported its second quarter results on July 21. At the time, the company vastly exceeded expectations and earned $3.50 per share, beating estimates by $0.41 per share. Revenue of $1.05 billion was nearly $62 million more than expected.
Same-store-sales rose 17.3 percent year over year during the quarter, prompting the company to raise its full-year same-store growth to the "mid-teens" from prior guidance of "high-single-digit" growth.
Chipotle did not issue third-quarter guidance in its second quarter report.
Sozzi Weighs In
Brian Sozzi, CEO and chief equities strategist at Belus Capital Advisors, spoke with Benzinga to discuss expectations for the coming quarter.
"From everything we can see, from social media to actually in the restaurants, Chipotle easily had another double-digit comp quarter," Sozzi told Benzinga. The analyst brushed off fears of price increases and food inflation which was "likely elevated" in the quarter but has since begun to moderate.
In fact, the analyst points out that given Chipotle's strong comp in the second quarter, the company should have reported an even strong earnings per share figure. The culprit, according to Sozzi, was "sticky levels" of inflation in proteins and veggies.
Shares of Chipotle soared to new all-time highs after its blowout second quarter results. Sozzi told Benzinga that this time around the company will need to show another sequential acceleration in comp to really "wow" traders and investors. The analyst admits "it will be tough to post another blowout figure."
Sozzi also said that if there is no acceleration in comp growth quarter over quarter, the market may sell the stock. The logic behind the move, according to the analyst, is that the company's comp growth has simply peaked in the second quarter which may cause some to question current valuations.
Chipotle typically offers investors insight on traffic at the start of the quarter. The analyst urged investors to pay attention if a recent consumer spending slowdown has found its way to Chipotle.
NPD Group stated in July that its long range forecast for restaurant traffic growth will be less than 1 percent annually. On the other hand, OTR Global said in late August that traffic still remains strong at Chipotle.
Sozzi told Benzinga that he doesn't believe Chipotle will report a spending slowdown among its customer base.
Sozzi maintains a Buy rating.
Elsewhere On The Street: Analyst Expectations
John Glass of Morgan Stanley expects Chipotle to earn $3.86 per share in the third quarter on revenue of $1.0803 billion. The analyst expects Chipotle to report 18.3-percent comp growth.
Shares are Overweight rated with a $708 price target.
Sara Senatore of Bernstein Research expects Chipotle to earn $3.07 per share in the third quarter on revenue of $1.0812 billion. The analyst expects Chipotle to report 19.5-percent comp growths.
Shares are Overweight rated with a $735 price target.
Latest Ratings for CMG
|Oct 2016||Goldman Sachs||Maintains||Neutral|
|Oct 2016||Credit Suisse||Downgrades||Outperform||Neutral|
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