Market Overview

Chipotle Mexican Grill Earnings Preview

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Chipotle Mexican Grill (NYSE: CMG) is expected to continued its recent streak of double-digit year-over-year revenue growth when it reports its third-quarter 2011 results later today, October 20. The fast-casual restaurant operator raised its prices this summer to offset rising costs, so investors may also be keeping an eye on whether traffic or same-store sales were affected.

Analysts on average predict that Chipotle will post earnings of $1.85 per share, which is up 17.8% from the same quarter of last year. That EPS estimate is unchanged over the past 90 days. Though Chipotle earnings fell short of estimates in the previous quarter, they beat expectations in the ten quarters before that.

The forecast also calls for the company to report revenues of $584.1 million, which would be a 22.5% increase from a year ago. Looking ahead to the current quarter, which will include the holiday season, analysts so far are looking for 21.1% year-over-year growth in revenues. And the forecast for the full year so far calls for revenues up 22.5% from a year ago, with per-share earnings 17.2% higher.

The Company

Chipotle Mexican Grill is headquartered in Denver and operates some 1,100 restaurants in the United States, as well as in Toronto, Canada, and London, UK. The company was founded in 1993, is an S&P 500 component and has a market cap of $9.7 billion.

During the three months that ended in September, the company announced the launch of the Chipotle Cultivate Foundation, which supports people, organizations and institutions committed to creating a sustainable future. Chipotle also announced plans for its ShopHouse Southeast Asian Kitchen, an Asian variation on the Chipotle fast-casual model.

Performance

The company has a long-term earnings per share growth forecast of 23.1% and its return of equity is 22.7%. While the P/E and PEG ratios are higher than the industry average, so is Chipotle's operating margin. Analysts that follow the stock have a mean price target of $325.47 per share, which is 4.6% higher than the current share price.

The share price has pulled back about 10% from a recent 52-week high. The stock is nearly 46% higher than at the beginning of the year and still above the 50-day and 200-day moving averages. The stock has outperformed competitors such as McDonald's (NYSE: MCD) and Yum! Brands (NYSE: YUM) year to date.

Action Items:

Bullish: Investors interested in exchange traded funds invested in Chipotle Mexican Grill might want to consider the following trades:

  • Rydex S&P Midcap 400 Pure Growth (NYSE: RFG) is about 14% higher than a year ago.
  • iShares Morningstar Mid Growth Index (NYSE: JKH) is more than 9% higher than a year ago.
  • PowerShares Dynamic Leisure & Entertainment (NYSE: PEJ) is about 4% higher than a year ago.

Bearish: Traders may want to consider these alternative positions:

  • Domino's Pizza (NYSE: DPZ) is about 99% higher than a year ago.
  • BJ's Restaurants (NASDAQ: BJRI) is almost 67% higher than a year ago.
  • Panera Bread (NASDAQ: PNRA) is almost 17% higher than a year ago.

Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

 

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