Can Chipotle’s Q3 2018 Earnings Boost Its Stock?



Stock performance

Chipotle Mexican Grill (CMG) is scheduled to post its third-quarter earnings after the market closes on October 25. As of October 19, the stock was trading at $428.54, which represents a fall of 5.1% since the announcement of its second-quarter earnings on July 26.

Chipotle’s strong second-quarter earnings and the upgrade of the stock by Morgan Stanley on August 15 led to a 52-week high of $530.68 on August 16. Since then, the stock has had a downward momentum as investors grew cautious of food safety issues. Pershing Square Capital Management lowered its stake in Chipotle, and Wedbush and Oppenheimer downgraded the stock.

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On August 16, the Centers for Disease Control and Prevention announced that Chipotle’s food safety issues between July 26 and July 30 in Powell, Ohio, which caused 647 people to become ill, was due to Clostridium perfringens. Stool samples collected from the people who became ill tested positive for the bacterium.

Chipotle stock fell after the announcement. On August 28, Pershing Square sold 823,357 Chipotle shares, cutting its stake to 7.4% from 10.4%, which made the stock fall even more.

Year-to-date performance

Despite the recent fall in CMG stock, Chipotle has returned 48.3%, YTD (year-to-date). The stock got a boost from its strong performance in the first and second quarters of 2018 and the appointment of Brian Niccol as its CEO in March.

Its peers Shake Shack (SHAK) and McDonald’s (MCD) have returned 26.4%, and -2.7%, respectively, YTD. The Consumer Discretionary Select Sector SPDR ETF (XLY) has risen 14.2% YTD.

Series overview

With Chipotle’s third-quarter earnings just around the corner, we’ll look at analysts’ revenue and EPS expectations in this series. We’ll also cover management’s guidance and analysts’ expectations for 2018. Finally, we’ll look at analysts’ recommendations and Chipotle’s valuation multiple.

Let’s start by looking at analysts’ revenue expectations for the third quarter.


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