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Chipotle (CMG) Q2 Earnings: Stock Likely to Disappoint?
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Chipotle Mexican Grill, Inc. (CMG - Free Report) is scheduled to report second-quarter 2016 results on Jul 21, after the market closes.
Last quarter, Chipotle’s loss was narrower than the Zacks Consensus Estimate, which led to a positive earnings surprise of 16.98%. Meanwhile, the trailing four-quarter average earnings surprise stands at 8.53%.
Let’s see how things are shaping up for this announcement.
For the first time since its IPO in 2006, Chipotle slipped to a loss in first-quarter 2016. Notably, the company continues to suffer from the negative publicity surrounding the E. coli and norovirus outbreaks, which is likely to hurt the top- and bottom-line performance in the to-be-reported quarter as well.
Recently, Chipotle lost the tag of the most popular Mexican restaurant owing to food-safety issues. Thus, the company is likely to further fall out of favor with health-conscious diners, which would affect traffic.
Meanwhile, Chipotle has undertaken a number of marketing and promotional initiatives to bring back customers to its stores, and the costs associated with these have already and will continue to impact profitability in the to-be-reported quarter. Also, implementation of food safety practices has increased the amount of labor required to prepare and serve food. This has resulted in higher labor costs which may further keep profits under pressure.
However, Chipotle’s efforts to maintain its market position via expansion plans coupled with various sales and technology-driven initiatives should somewhat boost quarterly results.
Earnings Whispers
Our proven model does not conclusively show that Chipotle is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.
Zacks ESP: Chipotle has an Earnings ESP of -6.48%. This is because the Most Accurate estimate stands at $1.01, whereas the Zacks Consensus Estimate is pegged higher at $1.08.
Zacks Rank: Chipotle has a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Papa John's International Inc. (PZZA - Free Report) has an Earnings ESP of +3.70% and a Zacks Rank #2.
Jack in the Box Inc. (JACK - Free Report) has an Earnings ESP of +1.15% and a Zacks Rank #2.
The Wendy's Company (WEN - Free Report) has an Earnings ESP of +22.22% and a Zacks Rank #3.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>
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Chipotle (CMG) Q2 Earnings: Stock Likely to Disappoint?
Chipotle Mexican Grill, Inc. (CMG - Free Report) is scheduled to report second-quarter 2016 results on Jul 21, after the market closes.
Last quarter, Chipotle’s loss was narrower than the Zacks Consensus Estimate, which led to a positive earnings surprise of 16.98%. Meanwhile, the trailing four-quarter average earnings surprise stands at 8.53%.
Let’s see how things are shaping up for this announcement.
CHIPOTLE MEXICN Price and EPS Surprise
CHIPOTLE MEXICN Price and EPS Surprise | CHIPOTLE MEXICN Quote
Factors Likely to Influence this Quarter
For the first time since its IPO in 2006, Chipotle slipped to a loss in first-quarter 2016. Notably, the company continues to suffer from the negative publicity surrounding the E. coli and norovirus outbreaks, which is likely to hurt the top- and bottom-line performance in the to-be-reported quarter as well.
Recently, Chipotle lost the tag of the most popular Mexican restaurant owing to food-safety issues. Thus, the company is likely to further fall out of favor with health-conscious diners, which would affect traffic.
Meanwhile, Chipotle has undertaken a number of marketing and promotional initiatives to bring back customers to its stores, and the costs associated with these have already and will continue to impact profitability in the to-be-reported quarter. Also, implementation of food safety practices has increased the amount of labor required to prepare and serve food. This has resulted in higher labor costs which may further keep profits under pressure.
However, Chipotle’s efforts to maintain its market position via expansion plans coupled with various sales and technology-driven initiatives should somewhat boost quarterly results.
Earnings Whispers
Our proven model does not conclusively show that Chipotle is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.
Zacks ESP: Chipotle has an Earnings ESP of -6.48%. This is because the Most Accurate estimate stands at $1.01, whereas the Zacks Consensus Estimate is pegged higher at $1.08.
Zacks Rank: Chipotle has a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Papa John's International Inc. (PZZA - Free Report) has an Earnings ESP of +3.70% and a Zacks Rank #2.
Jack in the Box Inc. (JACK - Free Report) has an Earnings ESP of +1.15% and a Zacks Rank #2.
The Wendy's Company (WEN - Free Report) has an Earnings ESP of +22.22% and a Zacks Rank #3.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>