For 4Q16, Chipotle Mexican Grill (CMG) posted EPS (earnings per share) of $0.55, as compared to the analysts’ expectation of $0.57. The lower-than-expected earnings initially made investors skeptical of Chipotle’s future earnings, leading to a fall in its stock price. By February 6, 2017, the stock price of Chipotle had declined to $395.59.
However, on March 21, 2017, research and analytics firm M Science forecast that Chipotle would beat Wall Street analysts’ sales estimate in the first quarter of 2017. The company stated that it gave the opinion after studying Chipotle’s same-store sales growth in February 2017 and the first ten days of March 2017.
After that, on March 28, 2017, Chipotle’s management announced that it would remove all artificial ingredients from its menu items. These factors appear to have regained investor confidence, leading to a rise in Chipotle’s stock price. As of March 29, 2017, Chipotle was trading at $434.34, which represents a rise of 9.8% from February 6, 2017.
Calendar 2016 was a tough one for Chipotle. Its stock price fell 21.4% during the year. But the company’s stock price has returned 15.1% YTD (year-to-date) in 2017. During the same period, Panera Bread (PNRA) has returned 24.5%, while the stock price of Shake Shack (SHAK) has fallen 6.6%.
The broader comparative index, the Consumer Discretionary Select Sector SPDR ETF (XLY), has meanwhile returned 7.8% since the beginning of 2017. XLY has more than 9.5% of its holdings in restaurant companies.
In this series, we’ll look at analysts’ estimates for revenue, EBIT (earnings before interest and tax) margins, and EPS (earnings per share) for the next four quarters. We’ll also look at Chipotle’s valuation multiple, recent analyst recommendations, and target prices for the next 12 months.
Let’s start by examining the analyst revenue estimates for the next four quarters.