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Bull of the Day: Chipotle (CMG)

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Chipotle Mexican Grill (CMG - Free Report) is a fast-casual restaurant chain known for their burritos, burrito bowls, and other Mexican-inspired menu options like tacos and quesadillas. The company is also known for their focus on fresh and organic ingredients. For instance, it sources its meat from producers that don’t give their animals antibiotics or growth hormones, and its beans and vegetables are organically grown.

Great Q1 Results

Chipotle’s great first quarter results helped cement that its big turnaround plan was working.

Earnings of $3.40 per share easily beat the Zacks Consensus Estimate, while revenues of $1.3 billion also beat our consensus estimate and jumped 13.9% year-over-year. Operating income also rose sharply, growing 19% from the prior-year period

Plus, comparable transactions were up 5.8%, which helped Chipotle report 9.9% comparable restaurant sales growth; this comps growth is the best Chipotle has seen in about four years.

The fast-casual chain expects more solid growth to continue in 2019, and management guided for a mid to high single-digit percentage rate increase in full year comparable sales.

CMG is On the Rise

Year-to-date, shares of Chipotle are up over 70% compared to the S&P 500’s gain of 20%.

Estimates have been rising lately too, pushing the stocks towards a Zacks Rank #1 (Strong Buy).

For the current fiscal year, the fast-casual giant’s earnings are expected to grow over 43% year-over-year. Two analysts have revised their estimates upwards in the past 60 days, and the Zacks Consensus Estimate has moved two cents higher from $12.99 to $13.01 during the same time frame.

2020 looks pretty strong too, and earnings could see year-over-year growth of nearly 30%; next year’s consensus estimate sits at $16.80 per share, with two upward revisions in the last 60 days.

What’s Next for Chipotle

Looking ahead, Chipotle is building on a few key strategies that will likely help their growth and performance down the line.

Just in Q1 alone, digital sales totaled $206 million and represented 15.7% of sales. And, digital sales soared 101% year-over-year. By relaunching a new website and capitalizing on online deliveries and third-party delivery platforms like Postmates, Chipotle is able to offset any waning store traffic.

The company recently added a new menu option, carne asada; the last protein addition was sofritas, which the company added back in 2013 (Chipotle removed chorizo from its menu in 2017 after just one year as a protein choice).

Chipotle is also expanding its beverage options and introducing new ovens that will help improve the quality of some of its other menu items, like its quesadilla and nachos.

Chipotle does report its Q2 earnings at the end of July, so earnings estimates and the Rank could be impacted by those results. But if you’re an investor looking for a food or restaurant stock to add to your portfolio, make sure to keep CMG on your shortlist.

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