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Can Chipotle Mexican Grill Bounce Back in 3Q17?

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Part 2
Can Chipotle Mexican Grill Bounce Back in 3Q17? PART 2 OF 6

What Analysts Expect for Chipotle’s 3Q17 Revenue

Revenue estimates

For 3Q17, analysts are expecting Chipotle Mexican Grill (CMG) to post revenues of $1.15 billion, which represents a 10.7% rise from $1.04 billion in 3Q16. Revenue growth is expected to be driven by positive SSSG (same-store sales growth) and the addition of new restaurants.

What Analysts Expect for Chipotle&#8217;s 3Q17 Revenue

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Revenue drivers

To drive SSSG, Chipotle is focusing on menu innovations, enhancement of customer experience, and marketing and promotional initiatives. The company has opened NEXT Kitchen in New York City, which checks the impact of potential new menu items. After a successful evaluation, the new menu item is expanded to other restaurants. Queso, a new menu item that was tested at NEXT Kitchen and more than 350 restaurants in Central and Southern California and Colorado, was launched across Chipotle’s US restaurants on September 12, 2017. The company is currently serving new salad greens, frozen margaritas, and Banuelos at its NEXT Kitchen.

By the end of 2Q17, Chipotle had implemented a new technology-enabled second make-line in 25 restaurants in Manhattan. The company plans to expand the initiative to 100 restaurants by the end of 2017. Along with these initiatives, the expansion of delivery and catering services at more restaurants is expected to contribute to the company’s 3Q17 SSSG.

Compared to 3Q16, the company operated 161 more restaurants at the end of 2Q17. In the past two quarters of 2017, management expects the company to open 106–121 new restaurants. These new restaurants are expected to drive Chipotle’s revenue in 3Q17.

Peer comparisons

During the same period, analysts are expecting Shake Shack (SHAK) and The Cheesecake Factory (CAKE) to post revenue growth of 27.4% and 1.1%, respectively.

Outlook

For the next four quarters, analysts are expecting Chipotle to post revenue of $4.8 billion, which represents a rise of 10.8% from $4.3 billion in the corresponding four quarters of the previous year.

Next, we’ll look at Chipotle’s estimated EBIT (earnings before interest and tax) margins for 3Q17.

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