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Chipotle’s Earnings Growth Outperformed Its Peers in 1Q17

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EPS growth

EPS (earnings per share) for all three fast casual restaurants we’re covering in this series rose in 1Q17. Chipotle Mexican Grill (CMG) outperformed its peers with a 281.8% rise in EPS.

In 1Q17, Chipotle’s EPS was $1.60 compared to -$0.88 in 1Q16. The rise was driven by revenue growth, expansion of EBIT (earnings before interest and tax) margins, and share repurchases in the last 12 months. The company has repurchased shares worth $381.3 million.

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Chipotle was followed by Shake Shack (SHAK). In 1Q17, SHAK posted EPS of $0.10, which represents a rise of 25.0% from $0.08 in 1Q16. Growth was driven by a rise in revenue. However, contraction of its EBIT margin offset some of the earnings growth. During the same period, Panera Bread’s (PNRA) EPS rose 17.3% to $1.83. Growth was driven by revenue growth, expansion of EBIT margins, and share repurchases. In the last 12 months, Panera has repurchased $300.0 million worth of shares. Share repurchases reduce the number of shares outstanding, thus boosting the company’s earnings.

Outlook

For the next four quarters, analysts are expecting Chipotle to outperform its peers in EPS growth. During that period, analysts are expecting the company to post EPS of $9.28, which represents a rise of 182.1% from the corresponding quarters of the previous year. In comparison, Panera Bread and Shake Shack are expected to post EPS growth of 13.8% and 4.2%, respectively, during the same period.

Next, let’s look at the valuation multiples for our three fast casual restaurants.

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