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Chipotle's (CMG) Shares Up on Q3 Earnings Beat, Sales Lag
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Chipotle Mexican Grill, Inc. (CMG - Free Report) reported mixed results for the third quarter of 2018, wherein earnings surpassed analysts’ expectations while revenues lagged the same.
Adjusted earnings of $2.16 per share topped the Zacks Consensus Estimate of $2 by 8%. The bottom line also grew 62.4% from the year-ago quarter, backed by increased revenues and lower food costs.
Earnings beat and a favorable top and bottom-line growth scenario must have encouraged investors as shares of Chipotle have jumped nearly 3% in after-hour trading on Oct 25. In a year’s time, the stock has rallied 53.5%, outperforming 7.1% increase recorded by the industry.
Chipotle suffered negative publicity throughout 2016 due to an issue related to food-borne illnesses that surfaced toward 2015end. As a safety measure, the company was forced to close several outlets. Ever since then, this fast-casual Mexican chain has been undertaking efforts to restore its economic model as well as regain customers’ trust.
Let’s have a detailed look at the reported quarter’s results.
Revenues and Comparable Restaurant Sales
Quarterly revenues of $1.22 billion lagged the consensus estimate of $1.23 billion by 0.6% but, grew 8.6% year over year. The upside is primarily attributable to improvement in comps and restaurant openings. In the quarter under review, Chipotle opened 28restaurants and closed or relocated 32.
Comps rose 4.4%, driven by an increase in average check, including 3.8% benefit from menu price increase, partially offset by 1.1% fewer transactions.
Chipotle Mexican Grill, Inc. Price, Consensus and EPS Surprise
Food costs, as a percentage of revenues, decreased 160 basis points (bps) to 33.4%, owing to the benefit of menu price increases and relief in avocado prices, partially offset by increase in beef prices, packaging and paper items.
General and administrative expenses were 8.9% of total revenues, reflecting an increase of 10 bps year over year due to rise in expenses related to corporate restructuring, including stock compensation modification expense, severance, relocation, and outside services. However, these increases were partially offset by the benefit of being compared with a nonrecurring charge of $30.0 million recorded in the third quarter of 2017 related to the data security incident that occurred in the first six months of 2017.
Restaurant-level operating margin was 18.7%, up 260 bps from 16.1% in the year-ago quarter. The upside was primarily driven by lower marketing and promotional expenses, and comps growth, partially offset by increased maintenance and repair costs.
Net income in the reported quarter summed $38.2 million, up from $19.6 million in the prior-year quarter.
Nine-Month Performance
In the first nine months of 2018, revenues totaled to $3.6 billion, marking an increase of 8.1% from the first nine months of 2017. Comps in the same period improved 3.3%, favored by increased average check and 4.3% benefit from menu price increases, partially offset by 2.1% fewer comparable restaurant transactions.
Restaurant-level operating margin was 19.3% for the nine months of 2018, marking an increase from 17.6% in the first nine months of 2017. The improvement was driven by comparable restaurant sales increases combined with lower marketing and promotional spend, partially offset by wage inflation at the crew level. Adjusted earnings in the first nine months of 2018 were $7.34 per share.
Balance Sheet
Cash and cash equivalents as of Sep 30, 2018, were $343 million compared with $184.6 million as of Dec 31, 2017.
Inventory totaled $18.3 million as of Sep 30, 2018, down from $19.9 million as of Dec 31, 2017. Goodwill, as a percentage of total assets, was 1% at the end of the third quarter compared with 1.1% at the end of 2017.
2018 Outlook
For 2018, management expects comps to grow in the low to mid-single digit, same as the prior guidance. The company expects to launch in the lower end of the previously announced 130-150 restaurants.
McDonald's (MCD - Free Report) reported impressive third-quarter 2018 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate. Adjusted earnings per share of $2.10 surpassed the consensus mark of $1.98 by 6.1% and increased 19% from the year-ago quarter (22% in constant currencies). The upside reflects stronger operating performance.
Domino's (DPZ - Free Report) reported mixed quarterly numbers for third-quarter 2018, wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same. Adjusted earnings of $1.95 per share outpaced the consensus mark of $1.73 and increased 53.5% on a year-over-year basis. The bottom-line improvement was driven by higher net income and lower diluted share count as a result of share repurchases.
Restaurant Brands (QSR - Free Report) reported lower-than-expected results in third-quarter 2018. Adjusted earnings of 63 cents per share missed the consensus mark by a couple of cents. However, the reported figure increased 8.6% from the year-ago quarter. This uptick can be primarily attributable to consistent improvement in the company’s top line along with the recovery of preferred shares in December 2017.
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Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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Chipotle's (CMG) Shares Up on Q3 Earnings Beat, Sales Lag
Chipotle Mexican Grill, Inc. (CMG - Free Report) reported mixed results for the third quarter of 2018, wherein earnings surpassed analysts’ expectations while revenues lagged the same.
Adjusted earnings of $2.16 per share topped the Zacks Consensus Estimate of $2 by 8%. The bottom line also grew 62.4% from the year-ago quarter, backed by increased revenues and lower food costs.
Earnings beat and a favorable top and bottom-line growth scenario must have encouraged investors as shares of Chipotle have jumped nearly 3% in after-hour trading on Oct 25. In a year’s time, the stock has rallied 53.5%, outperforming 7.1% increase recorded by the industry.
Chipotle suffered negative publicity throughout 2016 due to an issue related to food-borne illnesses that surfaced toward 2015end. As a safety measure, the company was forced to close several outlets. Ever since then, this fast-casual Mexican chain has been undertaking efforts to restore its economic model as well as regain customers’ trust.
Let’s have a detailed look at the reported quarter’s results.
Revenues and Comparable Restaurant Sales
Quarterly revenues of $1.22 billion lagged the consensus estimate of $1.23 billion by 0.6% but, grew 8.6% year over year. The upside is primarily attributable to improvement in comps and restaurant openings. In the quarter under review, Chipotle opened 28restaurants and closed or relocated 32.
Comps rose 4.4%, driven by an increase in average check, including 3.8% benefit from menu price increase, partially offset by 1.1% fewer transactions.
Chipotle Mexican Grill, Inc. Price, Consensus and EPS Surprise
Chipotle Mexican Grill, Inc. Price, Consensus and EPS Surprise | Chipotle Mexican Grill, Inc. Quote
Costs, Operating Highlights & Net Income
Food costs, as a percentage of revenues, decreased 160 basis points (bps) to 33.4%, owing to the benefit of menu price increases and relief in avocado prices, partially offset by increase in beef prices, packaging and paper items.
General and administrative expenses were 8.9% of total revenues, reflecting an increase of 10 bps year over year due to rise in expenses related to corporate restructuring, including stock compensation modification expense, severance, relocation, and outside services. However, these increases were partially offset by the benefit of being compared with a nonrecurring charge of $30.0 million recorded in the third quarter of 2017 related to the data security incident that occurred in the first six months of 2017.
Restaurant-level operating margin was 18.7%, up 260 bps from 16.1% in the year-ago quarter. The upside was primarily driven by lower marketing and promotional expenses, and comps growth, partially offset by increased maintenance and repair costs.
Net income in the reported quarter summed $38.2 million, up from $19.6 million in the prior-year quarter.
Nine-Month Performance
In the first nine months of 2018, revenues totaled to $3.6 billion, marking an increase of 8.1% from the first nine months of 2017. Comps in the same period improved 3.3%, favored by increased average check and 4.3% benefit from menu price increases, partially offset by 2.1% fewer comparable restaurant transactions.
Restaurant-level operating margin was 19.3% for the nine months of 2018, marking an increase from 17.6% in the first nine months of 2017. The improvement was driven by comparable restaurant sales increases combined with lower marketing and promotional spend, partially offset by wage inflation at the crew level. Adjusted earnings in the first nine months of 2018 were $7.34 per share.
Balance Sheet
Cash and cash equivalents as of Sep 30, 2018, were $343 million compared with $184.6 million as of Dec 31, 2017.
Inventory totaled $18.3 million as of Sep 30, 2018, down from $19.9 million as of Dec 31, 2017. Goodwill, as a percentage of total assets, was 1% at the end of the third quarter compared with 1.1% at the end of 2017.
2018 Outlook
For 2018, management expects comps to grow in the low to mid-single digit, same as the prior guidance. The company expects to launch in the lower end of the previously announced 130-150 restaurants.
Zacks Rank & Peer Releases
Chipotle currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
McDonald's (MCD - Free Report) reported impressive third-quarter 2018 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate. Adjusted earnings per share of $2.10 surpassed the consensus mark of $1.98 by 6.1% and increased 19% from the year-ago quarter (22% in constant currencies). The upside reflects stronger operating performance.
Domino's (DPZ - Free Report) reported mixed quarterly numbers for third-quarter 2018, wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same. Adjusted earnings of $1.95 per share outpaced the consensus mark of $1.73 and increased 53.5% on a year-over-year basis. The bottom-line improvement was driven by higher net income and lower diluted share count as a result of share repurchases.
Restaurant Brands (QSR - Free Report) reported lower-than-expected results in third-quarter 2018. Adjusted earnings of 63 cents per share missed the consensus mark by a couple of cents. However, the reported figure increased 8.6% from the year-ago quarter. This uptick can be primarily attributable to consistent improvement in the company’s top line along with the recovery of preferred shares in December 2017.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>