Why Citigroup Lowered Chipotle Mexican Grill's Price Target

Gregory Badishkanian of Citigroup on Sunday lowered his price target on Chipotle Mexican Grill, Inc. CMG to $782 from a previous $809 while maintaining a Buy rating.

According to Badishkanian, the company reported a "solid" fourth quarter with trends continuing into the new year however the first quarter is facing a harder year-over-year comp of 13.4 percent in the first quarter 2014 versus 9.3 percent in the fourth quarter 2013.

Badishkanian also notes that food costs rose 110 basis points year-over-year in the fourth quarter to 35.0 percent of sales due to higher dairy and beef costs which were partially offset by the menu price increase. The company has already said it is considering an additional price increase for beef menu items but may not occur before mid-year.

At this time the analyst is lowering his 2015 earnings per share estimates by $0.20 to $17.18 and lowering 2016 earnings per share estimates by $0.38 to $20.57. Also, a fiscal 2017 earnings per share estimate of $24.00 is being introduced.

Using a target multiple of approximately 38x (previously 38.6) to the 2016 earnings per share estimate of $20.57 yields the new target price of approximately $782.