Could Chipotle Outperform Analysts’ EPS Estimates in 2Q17?
2Q17 EPS estimates
In 2Q17, analysts expect Chipotle Mexican Grill (CMG) to post EPS (earnings per share) of $2.23, which represents 155.6% growth from $0.87 in 2Q16. The company’s EPS growth is expected to be driven by revenue growth, expansion of EBIT margins, and share repurchases.
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Since the beginning of 3Q16 until the end of 1Q17, the company has repurchased ~$195 million in shares. By the end of 1Q17, the company still had $144 million under its share repurchase program. Share repurchases boost the company’s EPS by lowering the number of outstanding shares.
From the chart above, we can see that in the last five quarters, the company has outperformed analysts’ estimates twice. When this happens, the stock price of the company tends to rise.
However, some of the growth in EPS is expected to be offset by the rise in the effective tax rate. For 2Q17, analysts expect the company’s effective tax rate to stand at 39.1% compared to 38.6% in 2Q16.
For the next four quarters, analysts expect Chipotle to post EPS of $8.98, which represents growth of 135.5% from $3.80 in the corresponding quarters of the previous year. Revenue growth, expansion of margins, and share repurchases are expected to drive Chipotle’s earnings.
Next, we’ll look at Chipotle’s valuation multiple.