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We expect restaurateur Chipotle Mexican Grill Inc. (CMG - Analyst Report) to beat expectations when it reports second quarter results on Jul 18 after the closing bell.

Why a Likely Positive Surprise?

Our proven model shows that Chipotle is likely to beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP: Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method) of Chipotle, which represents the difference between the Most Accurate estimate ($2.81) and the Zacks Consensus Estimate ($2.80), is +0.36%. This is a meaningful and leading indicator of a likely positive earnings surprise for shares.

Zacks Rank #2 (Buy): Chipotle currently carries a Zacks Rank # 2 (Buy). 

The combination of the stock’s Zacks Rank #2 and +0.36% ESP makes us confident of an earnings beat this quarter.

What is Driving the Better Than Expected Earnings?

We believe Chipotle’s new catering program (launched in the first quarter of 2013) and its recent offering of premium margaritas with Patron tequila is expected to position it well to generate above-average numbers in the quarter.

Further, in Mar 2013, Chipotle started a new outdoor print and radio advertising initiative, Skillfully Made, which showcases the company’s traditional cooking method and operating procedure. This program should also have a positive impact on quarterly results.

Last but not the least, Chipotle’s healthier menu options have always been its strength. Usage of naturally raised/locally grown ingredients like pork, chicken and beef provide Chipotle an edge over its peers.  

Other Stocks to Consider

Other than Chipotle, we also see likely earnings beat coming from three companies this earnings season.

Panera Bread Co. (PNRA - Analyst Report): Earnings ESP of +0.57% and a Zacks Rank #2 (Buy).

Kraft Foods Group Inc.(KRFT - Analyst Report): Earnings ESP of +5.97% and a Zacks Rank #2 (Buy).

Buffalo Wild Wings Inc (BWLD - Analyst Report): Earnings ESP of +2.56% and a Zacks Rank #3 (Hold).

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