Chipotle Has Added 2016 Earnings Risk, Wunderlich Warns

Chipotle Mexican Grill, Inc. CMG is scheduled to announce its second quarter results after the market closes on Tuesday. Ahead of the report, Wunderlich analyst Robert M. Derrington refined his estimates:

• Trimming his second quarter EPS estimate to $4.50 from $4.64 (versus the Street’s consensus of $4.42).
• Lifting his 2015 EPS estimate to $17.44 from $17.40 (compared to the Street’s  $17.32).
• Lowering his 2016 EPS estimate to $20.40 from $20.50 (Street $20.66).
• Modestly increasing his 2015 same-store-sales growth to 6.2 percent, from 5.9 percent, to better reflect the impact of carnitas sales and higher prices.
• Maintaining mid-single- digit SSS estimate for 2016.

The new estimates seek to reflect:

• Chipotle’s “new part-time worker benefit program (incl. college tuition, vacation, sick pay programs),” resulting from the so-called “war for talent.”
• Higher G&A, including the company's 2016 Biennial GM Conference, which is expected to cost about $12 million, and labor costs

Related Link: BTIG Initiates Coverage Of 15 Restaurant Stocks; Prefers Chipotle, Starbucks, B-Dubs Over McDonald's, Yum & Others

The firm notes that, “while new sales initiatives, return of pork supplies and higher menu pricing will help CMG lap its tough Q2 and Q3 comps,” the analysts believe the company appears fairly valued. They reiterate a Hold rating and $680.00 price target.

Shares of Chipotle rose 2.36 percent on Monday.