Cowen Downgrades Chipotle As 'Q4 Sales Were Far More Impacted From E. Coli Outbreak'
Analyst Andrew Charles mentioned that apart from the risk of a longer than expected recovery period, “sales slowness in 2015 prior to E. coli issues was never fully resolved and could further pressure the trajectory of the turnaround.”
Chipotle Mexican Grill has preannounced its November comp sales at a decline of 16 percent, driven by the negative publicity associated with the E. coli outbreak. Charles expects the overall 4Q comps to decline 8–11 percent, meaningfully worse than the low single digit decline investors had been anticipating.
Although the company is expected to implement a recovery plan soon, Chipotle Mexican Grill has so far been “focused on ensuring E. coli was eliminated from the supply chain, although the CDC investigation to find the source is disturbingly still ongoing,” Charles stated.
According to the Cowen report, the company’s recovery efforts are likely to drive sequential improvement over the next six months in monthly sales. However, given the slower than anticipated sales environment during 2015, the sales issues could be prolonged, as the company works through its recovery plan.
“In addition, there is risk the recovery is choppy, supported by mgmt's decision to rescind guidance for low-single-digit comps in 2016, implying near-term visibility is low as the company works through cleanup efforts,” the report added.
The EPS estimates for 2015, 2016 and 2017 have been lowered from $17.32 to $15.58, $20.65 to $17.15 and $24.75 to $20.60, respectively.
Latest Ratings for CMG
|Feb 2017||Maxim Group||Upgrades||Sell||Hold|
|Jan 2017||JP Morgan||Downgrades||Overweight||Neutral|
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