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What Analysts Expect from Chipotle’s Earnings

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Earnings estimate

For the next four quarters, analysts are expecting Chipotle Mexican Grill (CMG) to post EPS (earnings per share) of $9.29, which represents a growth of 143.7% from $3.81 in the corresponding quarters of the previous year. The EPS growth is expected to be driven by revenue growth and expansion of EBIT (earnings before interest and tax) margins.

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Revenue growth

Analysts are expecting the company’s EBIT margins to expand to 9.2% from 3.7% in the corresponding quarters of the previous year. The sales leverage from positive same-store sales growth (or SSSG), improvement in food handling procedures, and lower waste from enhanced food safety procedures are expected to increase Chipotle’s gross margins from 17.1% to 18.6%. The simplification in processes and the decline in overhead costs are expected to bring SG&A (selling, general, and administrative) expenses down from 12.7% to 5.1%. However, some of the expansion in EBIT margins could be offset by the increase in labor expenses due to the rise in labor wages and the rise in marketing and advertising expenditures.

From the above graph, we can see that the company has outperformed analysts’ estimate once in the last four quarters. When this happens, the stock price tends to rise.

Peer comparisons

For the next four quarters, analysts are expecting Panera Bread (PNRA) and Shake Shack (SHAK) to post EPS growth of 14.1% and 4.2%, respectively.

Next, we will look at Chipotle’s valuation multiples.

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