Why Investors Are Optimistic about Chipotle’s Q4 Earnings


Jan. 30 2019, Updated 11:04 a.m. ET

Stock performance

Chipotle Mexican Grill (CMG) is scheduled to post its fourth-quarter earnings results after the market closes on February 6. On January 28, the company was trading at $532.0, a rise of 25.5% since its announcement of its third-quarter earnings results on October 25.

The company is trading 2.2% below its 52-week high of $543.9 and 115% above its 52-week low of $247.52.

In the third quarter, Chipotle’s stock price was driven by its strong performance and investors’ optimism surrounding CEO Brian Niccol’s new initiatives, which included the enhancement of the customer experience via the removal of frictions in digital ordering, menu innovations, and improved visibility via strategic marketing.

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In the third quarter, Chipotle posted adjusted EPS of $2.16, outperforming analysts’ expectation of $2.0. Its revenue was in line with analysts’ expectations. During the earnings call, the company’s management stated that its For Real marketing campaign, which started in late September, had been resonating well with customers.

Along with these factors, the company’s stock price was driven by positive commentary from analysts, which we’ll discuss later in this series.

Year-to-date performance

Last year was a good one for Chipotle. Its stock rose 49.4%, whereas the S&P 500 Index fell 6.2% during the same period. The company has also started 2019 on a strong note, with its stock price up 23.2% YTD (year-to-date). During the same period, its peers Shake Shack (SHAK) and McDonald’s (MCD) have returned 9.3% and 3.4%, respectively. The broader comparative index, the Consumer Discretionary Select Sector SPDR ETF (XLY), which has invested 8.3% of its holdings in restaurants and travel companies, has returned 7.5% YTD.

Series overview

With Chipotle’s fourth-quarter earnings around the corner, in this series, we’ll consider analysts’ EPS and revenue expectations for the company in the period. We’ll also cover its management’s guidance.

We’ll end this series by looking at analysts’ recommendations and the company’s valuation multiple. Let’s start by looking at analysts’ revenue expectations for Chipotle.


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