Chipotle's Same-Store Sales Story Keeps Wells Fargo Impressed

Jeff Farmer of Wells Fargo maintains a Market-Weight rating on Chipotle Mexican Grill, Inc. (NYSE: CMG) after the casual fast food chain reported encouraging metrics in its fourth-quarter results, which shows that the "wheels of progress are turning."

Same-Store Sales

Farmer noted that Chipotle's same-store sales trends in January rose 24.6 percent at a time when the company's level of promotional activity was subdued compared to prior months. This marks an improvement on both a one-year and two-year basis and the momentum could continue moving forward.

Farmer added that January's sales results don't even fully factor in various initiatives to spur same-store sales growth, including the roll-out of a true digital ordering platform, a national TV advertising campaign and the long-overdue pursuit of one-to-one marketing.

A Look Ahead

Looking forward, the analyst is modeling Chipotle's same-store sales growth to rise 16 percent in the first quarter and 10 percent in the second quarter — both of which are conservative estimates.

Farmer also pointed that Chipotle saw a notable same-store sales improvement in the Northeast markets, which has lagged other regions as of late.

The analyst sees a sustained same-store sales recovery through 2017, which should result in the Street moving their estimates higher over time. Consensus earnings per share for the year was $8.47 heading into Thursday's earnings print, which is short of Farmer's estimate of $9.62 per share.

Guidance, Rating And Price Target

Chipotle guided its full-year earnings to be $10.00 per share - a figure which will naturally be debated among analysts and investors.

Farmer maintains a Market Weight rating on Chipotle's stock with valuation range of $450 to $470.

At last check, shares of Chipotle were down 4.23 percent at $405.40.