Maxim Maintains Hold Rating On Chipotle Ahead Of Q3 Results

• Chipotle Mexican Grill, Inc CMG shares have been volatile in 2015 and are up 4 percent year-to-date.
• Maxim Group’s Stephen Anderson maintained a Hold rating on the company, with a price target of $810.
• Chipotle Mexican is poised to benefit from the return of pork in the form of lower food costs and enhanced sales, Anderson stated.

Analyst Stephen Anderson expects Chipotle Mexican to report its 3Q15 EPS at $4.59, marginally missing the consensus expectations due to pork supply disruptions. The company’s same restaurant sales likely to have reached a trough in 3Q, and are expected to recover to mid-to-high single digit comp growth in 2016.

Recent checks revealed that although pork supplies remain disrupted in the Atlanta and Charlotte markets, they are likely to be restored to all US restaurants in the next few weeks, Anderson added.

The analyst believes that Chipotle Mexican would benefit earlier than its peers from lower food costs, and that “the system-wide return of lower-cost pork to menus nationwide” would boost margin expansion.

Anderson added, however, that the company’s current share valuation already reflects the sales rebound expected from the return of pork and moderation of food costs in 2016.

“We estimate that, in addition to providing a comp lift of about 100 bps-200 bps to full-year 2016 same-restaurant sales, the return of pork provides a further boost of as much as $0.15-$0.20 to 2016E EPS in the form of lower food costs (relative to higher-cost beef),” the Maxim Group report stated.