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BTIG Believes Chipotle Will Fully Recover From Safety Issues Eventually

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BTIG Believes Chipotle Will Fully Recover From Safety Issues Eventually
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While Chipotle Mexican Grill, Inc. (NYSE: CMG) comps remain challenged, there are early signs of Chiptopia driving traffic, BTIG’s Peter Saleh said in a report. He maintained a Neutral rating on Chipotle, saying that the company would “eventually fully recover from its food safety issues.”

Chipotle reported its 2Q16 EPS at $0.87, short of the BTIG estimate of $1.15 and consensus expectation of $0.91. The shortfall was driven by weaker same-store sales, which declined 23.6 percent, with a 19.3 percent decline in traffic.

Although the results showed an improvement of 610 bps from the prior quarter, they were worse than expected and driven mostly by less discounting, analyst Peter Saleh mentioned.

Related Link: Chipotle Safety Concerns Continue To Hurt Comps In Q2

The comp estimates for 3Q16 and 4Q16 have been reduced from (12.5) percent to (18.0) percent and from 5.0 percent to (5.0) percent, respectively. The EPS estimates for 2016 and 2017 have been reduced from $5.03 to $3.01 and from $12.87 to $7.81, respectively, to reflect the sales outlook.

Trends Improving

July trends show a 200-300 bps improvement in comps. Comps are trending at a decline of about 20 percent in the first several weeks, with a decline of about 15 percent in traffic trends. Chiptopia registered 3.6MM users in July, accounting for 30 percent of transactions, being executed on the new rewards program, Saleh stated.

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Latest Ratings for CMG

DateFirmActionFromTo
Feb 2017Maxim GroupUpgradesSellHold
Jan 2017JP MorganDowngradesOverweightNeutral
Jan 2017WedbushUpgradesUnderperformNeutral

View More Analyst Ratings for CMG
View the Latest Analyst Ratings

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