Market Overview

Chipotle Mexican Grill Earnings Preview

Chipotle Mexican Grill (NYSE: CMG) is scheduled to share its second-quarter 2011 results tomorrow, July 19, after the markets close. The stock has been on a tear, with frequent new 52-week highs, a market cap that recently hit $10 billion, and generating a return of more than 200% in the past 18 months.

Analysts are looking for Chipotle to report per-share earnings of $1.68, which is up from the estimate of $1.67 just 60 days ago, as well as $1.46 per share earnings in the same period of last year. The consensus forecast also calls for revenues of $558.3 million, an increase of 19.6% from a year ago.

Note that Chipotle topped consensus earnings estimates in the past ten quarters, though the beat was by only two cents per share in the first quarter. And analysts so far are looking for sequential and year-over-year growth of both earnings and revenue for the current quarter.

The Company

Chipotle Mexican Grill is based in Denver and operates more than 1,075 quick-casual restaurants primarily in North America, but also in Toronto, Ontario, and London, United Kingdom. The menu focuses on burritos, tacos and salads prepared from fresh, high-quality ingredients that where possible are sustainably grown and naturally raised by local producers.

During the three months that ended in June, the company unveiled its new ShopHouse Southeast Asian Kitchen concept, saw its stock added to the S&P MidCap 400 index, and launched its Wrap What You Love marketing initiative.

Performance

The long-term earnings per share growth forecast is 20.4% and the return on equity is 23.3%. Net cash flow from operations more than doubled in the past year. Despite hefty P/E and PEG ratios, as well as short interest at 15.2% of the float, 8 of 18 analysts following Chipotle rate the stock a Buy or Strong Buy.

The share price is 52.5% higher than at the beginning of the year, and up 137.3% from a year ago. The stock has outperformed the restaurants industry average and the broader markets year to date.

Action Items:

Bullish: Traders interested in exchange traded funds invested in Chipotle might want to consider the following trades:

  • PowerShares Dynamic Mid Cap Growth Portfolio (NYSE: PWJ): +28.9% in the past year
  • PowerShares Dynamic Leisure & Entertainment Portfolio (NYSE: PEJ): +40.6% in the past year
  • Vanguard Mid-Cap Growth Index Fund (NYSE: VOT): +40.9% in the past year
  • Guggenheim Sector Rotation ETF (NYSE: XRO): +29.8% in the past year

Bearish: Traders looking for a contrarian option might want to consider these alternative postions:

  • Direxion Daily Mid Cap Bear 3X Shares (NYSE: MWN): +274.4% in the past year
  • ProShares UltraShort MidCap 400 (NYSE: MZZ): +98.1% in the past year
  • ProShares UltraShort Russell MidCap Growth (NYSE: SDK): +92.4% in the past year

Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

Posted-In: Chipotle Mexican Grill earnings previewsEarnings Long Ideas Short Ideas Previews Trading Ideas ETFs

 

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