Concerns Related To Chipotle's Sales, Visibility 'Too Great'

BTIG’s Peter Saleh believes there is limited visibility into Chipotle Mexican Grill, Inc. CMG's sales, margins and EPS for 2017 and beyond.

Saleh maintains a Neutral rating on the company.

Limited Visibility

“We believe management’s 2017 EPS guidance of $10.00, which they consider a stretch goal, leaves no room for error on the sales and margin recovery,” the analyst mentioned.

Saleh also noted Q4:16 EPS missing the guidance indicates that management’s visibility is as limited as that among investors.

“For 2017, we believe the launch of TV ads could help drive new guests to the brand which could aid in the recovery but still await more consistent top and bottom line trends before becoming more constructive on the name,” the analyst went on to say.

Pre-Announced Results

Chipotle Mexican Grill pre-announced its same-store sales for Q4:16 marginally below the consensus and estimate, with the EPS now expected at $0.50–$0.58, below the guidance and the estimate.

“Management plans to begin a new advertising campaign in April utilizing TV in some markets, make a greater effort on digital ordering and continues to simplify its operations which are expected to improve the customer experience fairly quickly,” Saleh reported.

The EPS estimates for 2016 and 2017 have been lowered from $1.55 to $1.08 and from $8.83 to $8.64, respectively, based on the pre-announced results.