Market Overview

Cowen Downgrades Chipotle As 'Q4 Sales Were Far More Impacted From E. Coli Outbreak'

Cowen Downgrades Chipotle As 'Q4 Sales Were Far More Impacted From E. Coli Outbreak'
Related CMG
Stifel's Restaurant Stock Menu: What To Buy, What To Sell
Benzinga's Top Analyst Calls For April 19, 2018
Stocks To Watch: Earnings Blockbusters And Trump Talks Drug Prices (Seeking Alpha)

  • Shares of Chipotle Mexican Grill, Inc. (NYSE: CMG) have declined 22.05 percent over the past three months, hitting a low of $536.19 on November 20.
  • Andrew M. Charles of Cowen and Company has downgraded the rating on the company from Outperform to Market Perform, while lowering the price target from $775 to $515.
  • The company’s 4Q sales were affected worse than expected by the E. coli outbreak, and Charles anticipates the recovery to likewise take longer than expected.
  • 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.

    Related Link: Barclays Cuts CMG PT To $540

    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.

    Image Credit: By Aude (Own work) [CC BY-SA 2.5], via Wikimedia Commons

    Latest Ratings for CMG

    Mar 2018WedbushMaintainsNeutralNeutral
    Mar 2018Wells FargoMaintainsMarket PerformMarket Perform
    Feb 2018BairdUpgradesNeutralOutperform

    View More Analyst Ratings for CMG
    View the Latest Analyst Ratings

    Posted-In: Analyst Color Long Ideas Downgrades Price Target Restaurants Analyst Ratings Trading Ideas General Best of Benzinga


    Related Articles (CMG)

    View Comments and Join the Discussion!