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Chipotle (CMG) Down 6.4% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Chipotle Mexican Grill (CMG - Free Report) . Shares have lost about 6.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Chipotle due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Chipotle's Q4 Earnings and Revenues Miss Estimates

Chipotle Mexican Grill, Inc. reported fourth-quarter 2022 results, with earnings and revenues missing the Zacks Consensus Estimate. However, the top and the bottom line increased on a year-over-year basis.

Q4 Earnings & Revenue Discussion  

In the quarter under review, Chipotle reported adjusted earnings per share (EPS) of $8.29, missing the Zacks Consensus Estimate of $8.88. The bottom line improved 48.6% from the $5.58 reported in the year-ago quarter.

Quarterly revenues of $2,180.6 million missed the consensus mark of $2,229 million. The top line increased 11.2% on a year-over-year basis. The upside can primarily be attributed to robust comparable restaurant sales and new restaurant openings. In the quarter under review, Chipotle opened 100 new restaurants.

Digital sales contributed 37.4% of total food and beverage revenues. During the third quarter, comparable restaurant sales increased 5.6% year over year, following growth of 7.6% (in third-quarter 2022), 10.1% (in second-quarter 2022), 9% (in first-quarter 2022) and 15.2% (in fourth-quarter 2021).

Costs, Operating Highlights & Net Income

During fourth-quarter 2022, food, beverage and packaging costs, as a percentage of revenues, came in at 29.3%, down 230 basis points (bps) year over year. In the fourth quarter, the benefit of menu price increases was overshadowed by inflation across the menu, mainly due to higher costs for dairy and tortillas.

During the reported quarter, the restaurant-level operating margin came in at 24%, up from 20.2% reported in the year-ago quarter. The uptick was primarily backed by sales leverage benefits and lower delivery fees. However, this was partially offset by wage inflation and higher food costs.

Adjusted net income in the reported quarter amounted to $231.4 million compared with $159.1 reported million in the prior-year quarter.

Balance Sheet

As of Dec 31, 2022, the company reported cash and cash equivalent of $384 million compared with $815.4 million as of Dec 31, 2021.

Inventory totaled $35.7 million as of Dec 31, 2022, compared with $32.8 million as of Dec 31, 2021. Goodwill (as a percentage of total assets) came in at 0.3% at the end of the fourth quarter of 2022.

During the fourth quarter, the company repurchased $198.9 million worth of stock at an average price of $1,486.7. Management approved an additional $200 million (exclusive of commissions) to repurchase shares. As of Dec 31, the company had approximately $413.9 million available for the buyback program.

2022 Highlights

Total revenues in 2022 amounted to $8,634.7 million compared with $7,547.1 million in 2021.

Adjusted Net Income in 2022 totaled $919.8 million compared with $724.8 million in 2021.

In 2022, diluted EPS came in at $32.78 per share compared with $25.42 reported in the previous year.

2023 Outlook

For first-quarter 2023, the company expects comps growth in the high single digits.

The company expects to open 255 to 285 new restaurants in 2023. It expects a 2023 tax rate in the range of 25-27%.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

At this time, Chipotle has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.


Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Chipotle has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Chipotle is part of the Zacks Retail - Restaurants industry. Over the past month, McDonald's (MCD - Free Report) , a stock from the same industry, has gained 1%. The company reported its results for the quarter ended December 2022 more than a month ago.

McDonald's reported revenues of $5.93 billion in the last reported quarter, representing a year-over-year change of -1.4%. EPS of $2.59 for the same period compares with $2.23 a year ago.

For the current quarter, McDonald's is expected to post earnings of $2.29 per share, indicating a change of +0.4% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.1% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for McDonald's. Also, the stock has a VGM Score of D.

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