RBC Expects To See 'Outsized' EPS Growth At Chipotle Ahead Of Next Week's Q1 Results

In a report published Monday, RBC Capital Markets analyst David Palmer offered a preview of

's upcoming first quarter earnings report. Palmer estimated Chipotle to report same-store sales growth of 12 percent while earning $3.77 per share on revenue of $1.1115 billion. The consensus estimate is calling for an earnings per share of $3.62 on revenue of $1.10 billion. "While sales momentum for the broader restaurant industry proved to be choppy in 1Q, we believe Chipotle's trends have held firm," Palmer wrote. "Based in part on our consumer panel data through March, we believe our same-store sales growth estimate may prove conservative. While stable two-year sales trends would point to ~12 percent same-store sales growth this quarter, stable three-year same-store sales trends would imply 14 to 16 percent." Palmer said that uncertainty within Chipotle's food cost line could become a new reality moving forward. His impression is that the level of specificity with regards to food costs this year (35 percent guidance) is a reflection of management's "frustration" in missing recent targets and thus could prove to be conservative. The analyst calculated a food cost estimate of 34.8 percent, which incorporates higher proteins and avocado costs, partially offset from "modest" relief from dairy inputs and a $2 million charge related to the suspension of a pork supplier along with the likelihood of a 1.5 percent menu price increase in the second half of 2015. Shares remain Outperform rated with an unchanged $740 price target.