Chipotle Mexican Grill (CMG), a fast-casual restaurant company based in Denver, Colorado, posted its 4Q16 earnings after the market closed on February 2, 2017. It posted adjusted EPS (earnings per share) of $0.55 on revenue of $1.0 billion.
Analysts were expecting the company to post EPS of $0.57 on revenue of $1.0 billion. Higher marketing and promotional expenditure and an increase in the cost of sales led Chipotle to post lower-than-expected 4Q16 earnings. This made investors skeptical of Chipotle’s future earnings, leading to a fall in its stock price. On February 6, 2017, Chipotle was trading at $395.60, which represents a fall of 6.5% since the announcement of 4Q16 earnings.
2016 was a tough year for Chipotle, as the company struggled to overcome its food safety issues. In 2016, the company’s stock fell 15.9%. However, 2017 has started on a brighter note. Year-to-date, the company’s stock has returned 4.8%. During the same period, its peers, Panera Bread (PNRA) and Shake Shack (SHAK) have returned 5.1% and -2.6%, respectively.
The Consumer Discretionary Select Sector SPDR ETF (XLY) has returned 3.5% since the beginning of 2017. The fund has more than 9.5% of its holdings in restaurant companies.
In this series, we’ll take a look at Chipotle’s 4Q16 earnings call and notes. We’ll also look at the company’s performance on key metrics during the quarter. We’ll cover the management’s guidance and analysts’ estimates for 2017.
Let’s start by discussing Chipotle’s revenue in 4Q16.