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Chipotle Hopes to Bounce Back after Strong 2Q17 Earnings

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2Q17 performance

Chipotle Mexican Grill (CMG), a fast casual restaurant, posted its 2Q17 earnings on July 25, 2017. The company posted an adjusted EPS (earnings per share) of $2.32 on revenues of $1.17 billion. Compared to 2Q16, the company’s EPS rose 165.9%, while its revenues rose 17.1%.

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Stock performance

Analysts were expecting the company to post EPS of $2.18 on revenues of $1.19 billion. The company also posted SSSG (same-store sales growth) of 8.1%—compared to analysts’ estimate of 9.7%. Although Chipotle’s 2Q17 revenue and SSSG were lower than analysts’ estimates, the stock price rose due to better-than-expected 2Q17 earnings. Chipotle’s management took initiatives to drive its SSSG. The company started the Chipotle NEXT Kitchen in New York City to test potential menu items. Chipotle also implemented meal customizations. Guests are able to personalize their orders through a digital ordering platform. As of July 27, 2017, Chipotle was trading at $349.84—a rise of 0.3% since the announcement of its 2Q17 earnings.

Year-to-date performance

Chipotle’s stock price continues to struggle with food safety issues since E. coli reports surfaced back in October 2015. The stock has fallen 7.3% since the beginning of 2017. During the same period, peers Shake Shack (SHAK) and The Cheesecake Factory (CAKE) saw their stock prices fall 2.9% and 18.6%, respectively.

Notably, the iShares U.S. Consumer Services ETF (IYC) and the S&P 500 Index (SPX) have returned 11.0% and 10.6%, respectively.

Series overview

In this series, we’ll look at Chipotle’s 2Q17 earnings call and its performance on key metrics during the quarter. We’ll also cover management’s 2017 guidance and analysts’ estimates for the next four quarters. Finally, we’ll look at Chipotle’s valuation multiple and analysts’ recommendations.

First, we’ll look at Chipotle’s 2Q17 revenue growth.

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