Why Chipotle’s Stock Fell after Its 3Q17 Earnings


Oct. 27 2017, Published 2:02 p.m. ET

3Q17 performance

Chipotle Mexican Grill (CMG) posted its 3Q17 earnings after the market closed on October 24. In 3Q17, the company had posted adjusted EPS (earnings per share) of $1.33 on revenues of $1.13 billion. Compared to 3Q17, the company’s EPS grew 68.4% while its revenue rose 8.8%.

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Stock performance

Analysts were expecting Chipotle to post EPS of $1.63 on revenue of $1.14 billion. Also, the company’s SSSG (same-store sales growth) of 1.0% was lower than analysts’ estimate of 1.2%. After posting weak 3Q17 SSSG, the company’s management has cut its 2017 SSSG guidance and lowered its restaurant development guidance to the lower end of the earlier estimated range of 195 to 210 restaurants for 2017. The lower-than-expected 3Q17 earnings and trimming of SSSG guidance for 2017 appear to have made investors skeptical about future earnings, leading to a fall in Chipotle’s stock price. As of October 26, Chipotle was trading at $281.52, which represents a fall of 13.2% since the announcement of its 3Q17 earnings.

Year-to-date performance

Chipotle’s stock continues to struggle in 2017 as its share price has fallen 25.4% since the beginning of 2017. During the same period, the stock price of Shake Shack (SHAK) has risen 0.20% while the stock price of The Cheesecake Factory (CAKE) has fallen 26.2%.

Notably, the broader comparative indices, the S&P 500 Index (SPX) and the Consumer Discretionary Select Sector SPDR Fund (XLY), have returned 14.4%, and 11.7% year-to-date, respectively.

Series overview

In this series, we’ll look at Chipotle’s 3Q17 earnings call and compare the company’s 3Q17 performance with analysts’ estimates. We’ll also cover management’s guidance for 2017 and analysts’ estimates for the next four quarters. Finally, we’ll wrap this series up by looking at Chipotle’s valuation multiple and analysts’ recommendations.

First, let’s start our analysis by looking at Chipotle’s 3Q17 revenue in the next part of this series.


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