Chipotle Earnings Call Fails to Impress

Chipotle Beats Analysts’ Q3 Expectations, Stock Falls

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On Oct. 21, Chipotle stock fell about 4 percent in the after-hours trading session after the company released its third-quarter earnings results. Chipotle's quarterly sales and earnings beat analysts’ average estimates. The stock fell as the shift to delivery is boosting expenses and resulting in fewer sales of wider-margin drinks, which dragged down its profit.

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Chipotle Earnings Call Fails to Impress
Source: Pixabay

When did Chipotle report earnings?

Chipotle reported its third-quarter 2020 financial results yesterday after the market closed. The restaurant company held its earnings conference call at 4:30 p.m. ET. Investors and media can listen to the webcast on the company’s investor relations website.

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Chipotle’s earnings report highlights

In the third quarter, Chipotle reported adjusted EPS of $3.76, compared with $3.82 in the third quarter of 2019. The adjusted EPS beat analysts’ average estimate of $3.47. Chipotle generated sales of $1.60 billion in the third quarter, which was 14.1 percent higher than the third quarter of 2019. The company also beat analysts’ average sales estimate of $1.59 billion.

Chipotle's same-store sales rose 8.3 percent in the third quarter, whereas analysts had expected a 7.3 percent rise. Chipotle’s online sales grew over 202 percent year-over-year to $776.4 million and accounted for 48.8 percent of the company’s total sales. By the end of the third quarter, Chipotle operated 2,710 restaurants—a rise of 164 units from the 2,546 restaurants it operated at the end of the third quarter of 2019. In the third quarter of 2020, the company opened 44 stores and permanently closed three units.

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Chipotle’s stock price is falling after its Q3 results

Chipotle stock was down about 3.7 percent at $1,316 in the after-hours trading session on Oct. 21 as of 7:59 p.m. ET. The stock rose 1.4 percent on Oct. 21 and closed at $1,366.66 with a market capitalization of $38.2 billion.

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Chipotle stock has risen by 3.4 percent in the last five days and 73.4 percent in the last year. The stock is trading 1.3 percent below its 52-week high of $1,384.46 and 229.3 percent above its 52-week low of $415. Chipotle doesn’t currently pay a dividend.

What is Chipotle’s stock forecast?

According to data compiled by TipRanks, 14 of the 28 analysts covering Chipotle have a "buy" or equivalent rating on Chipotle. The remaining 14 analysts have a "hold" rating, and none recommend "sell." Currently, analysts' average stock price forecast for Chipotle is $1,365.68, which suggests a 0.1 percent downside. Their highest target price of $1,600 implies a 17.1 percent upside, while their lowest target price of $1,050 implies a 23.2 percent downside.

I believe long-term investors should consider a position in Chipotle stock. The company is set to benefit from growth initiatives such as drive-thru lanes and digital programs, and Chipotle’s online sales will likely continue to gain traction amid the coronavirus pandemic. Carne asada, a fan favorite, also returned to Chipotle’s online menu last month.

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