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This does not mean, however, that the company’s earnings and revenue will not be important in the eyes of investors and analysts; they still will be watched closely. Investors and analysts alike are really looking for the company’s progress on its journey back to previous peak levels. The Zacks Consensus EPS estimate for the quarter stands at $1.04, which would represent a year-over-year decrease of 76.56%. Revenue is projected to be around $1.04 billion, representing a year-over-year drop of nearly 13%.
Aside from earnings per share and revenue figures, these 3 metrics will be closely looked for in Chipotle’s earnings results, and will be key for investors and analysts to see the progress the company has made in its turnaround effort:
Same-Store Sales Growth
It shouldn’t be a surprise that same-store sales will be likely the most important metric that will be looked at. Restaurant stocks are constantly measured by the metric, and for Chipotle, the figure it reports will be a show of the slow down it continues to see in its stores, but also how well its comeback is working.
In its most recent earnings report from the first quarter of this year, Chipotle reported a brutal 29.7% drop in same store restaurant sales for the March-ended quarter. In a previous earnings call, management had said that sales for April were down 26%.
Credit Suisse said as recently as Tuesday that it expects a 20% drop in comps for Chipotle’s second quarter, in line with consensus views, but up slightly from previous expectations of a 22% drop. Credit Suisse analyst Jason West wrote, “these sales forecasts are a notable improvement from -30% comp in Q1, CMG’s sales recovery seems to have stalled out in recent months.”
Number of New Store Openings
When a restaurant is trying to grow, there are two ways in which it does so. The first is organically, which is where same-store sales growth comes in, where the company relies on increased traffic in already existing restaurants. The other is inorganically, which is where new restaurant openings spur revenue growth by the sheer fact that they added another revenue-producing location.
Any company can obviously grow its sales by opening another location, which is why same-store sales growth is a much more valuable measure, but for an expanding company like Chipotle, inorganic growth is still important too.
In the first quarter, Chipotle reported that it had opened 58 new restaurants, bringing its total locations to 2,066. While in its Q1 earnings report it did not mention a specific number of restaurants to be opened in Q2, Chipotle management did say that for the full year there would be between 220 and 235 new restaurant openings. Based on these estimates, by the start of 2017 Chipotle could have anywhere from 2,228 to 2,243 total locations.
Full Year Outlook
Usually when a company reports its quarterly financial results for quarters 1 through 3, they will adjust, update, or confirm their full year outlook. Chipotle’s guidance for the rest of the year after its second quarter would be telling of two main things. First, an update to full-year guidance would show the levels at which its previous food safety issues are still affecting the company, and how much they plan to spend on marketing and customer reacquisition. Secondly, it would show whether or not the company is on a good path to regaining its previous levels of sales and profits.
When Chipotle reported its Q1 earnings earlier in the year, it unfortunately did not release much guidance on the rest of the year other than that it expected to open 220 to 235 new restaurants as mentioned earlier, and then that it expected an effective full year tax rate of approximately 38.4%.
Currently the Zacks Consensus Estimate for EPS for the full year stands at $4.82, and is $4.2 billion for revenue. If Chipotle does release positive guidance for the rest of the year, it could be a great sign that the company is recovering well from its earlier issues, and could send its stock price higher. If there is no updated guidance and poor earnings results though, the stock could sink lower as investors lose faith in its comeback.
Chipotle has a great deal to prove when it reports its second quarter financial results tomorrow. As the company tries to make a comeback with its customers after food safety issues, it too will need to win back investors who have made the stock fall as far as it has. Chipotle is currently a Zacks Rank #4 (Sell), and will report Thursday after the bell. Many eyes will be on its earnings report, and subsequently on its share price.
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3 Key Things To Look For In Chipotle's Q2 Earnings Report
Chipotle Mexican Grill Inc. (CMG - Free Report) is scheduled to release its second quarter financial results tomorrow, July 21st. The company’s earnings report is different from most other companies as metrics other than earnings and revenue will be incredibly important, if not more so because declines are expected in both after Chipotle’s recent fallout due to food-safety issues. (Also read: 10 Delicious Facts Behind Chipotle)
This does not mean, however, that the company’s earnings and revenue will not be important in the eyes of investors and analysts; they still will be watched closely. Investors and analysts alike are really looking for the company’s progress on its journey back to previous peak levels. The Zacks Consensus EPS estimate for the quarter stands at $1.04, which would represent a year-over-year decrease of 76.56%. Revenue is projected to be around $1.04 billion, representing a year-over-year drop of nearly 13%.
Aside from earnings per share and revenue figures, these 3 metrics will be closely looked for in Chipotle’s earnings results, and will be key for investors and analysts to see the progress the company has made in its turnaround effort:
Same-Store Sales Growth
It shouldn’t be a surprise that same-store sales will be likely the most important metric that will be looked at. Restaurant stocks are constantly measured by the metric, and for Chipotle, the figure it reports will be a show of the slow down it continues to see in its stores, but also how well its comeback is working.
In its most recent earnings report from the first quarter of this year, Chipotle reported a brutal 29.7% drop in same store restaurant sales for the March-ended quarter. In a previous earnings call, management had said that sales for April were down 26%.
Credit Suisse said as recently as Tuesday that it expects a 20% drop in comps for Chipotle’s second quarter, in line with consensus views, but up slightly from previous expectations of a 22% drop. Credit Suisse analyst Jason West wrote, “these sales forecasts are a notable improvement from -30% comp in Q1, CMG’s sales recovery seems to have stalled out in recent months.”
Number of New Store Openings
When a restaurant is trying to grow, there are two ways in which it does so. The first is organically, which is where same-store sales growth comes in, where the company relies on increased traffic in already existing restaurants. The other is inorganically, which is where new restaurant openings spur revenue growth by the sheer fact that they added another revenue-producing location.
Any company can obviously grow its sales by opening another location, which is why same-store sales growth is a much more valuable measure, but for an expanding company like Chipotle, inorganic growth is still important too.
In the first quarter, Chipotle reported that it had opened 58 new restaurants, bringing its total locations to 2,066. While in its Q1 earnings report it did not mention a specific number of restaurants to be opened in Q2, Chipotle management did say that for the full year there would be between 220 and 235 new restaurant openings. Based on these estimates, by the start of 2017 Chipotle could have anywhere from 2,228 to 2,243 total locations.
Full Year Outlook
Usually when a company reports its quarterly financial results for quarters 1 through 3, they will adjust, update, or confirm their full year outlook. Chipotle’s guidance for the rest of the year after its second quarter would be telling of two main things. First, an update to full-year guidance would show the levels at which its previous food safety issues are still affecting the company, and how much they plan to spend on marketing and customer reacquisition. Secondly, it would show whether or not the company is on a good path to regaining its previous levels of sales and profits.
When Chipotle reported its Q1 earnings earlier in the year, it unfortunately did not release much guidance on the rest of the year other than that it expected to open 220 to 235 new restaurants as mentioned earlier, and then that it expected an effective full year tax rate of approximately 38.4%.
Currently the Zacks Consensus Estimate for EPS for the full year stands at $4.82, and is $4.2 billion for revenue. If Chipotle does release positive guidance for the rest of the year, it could be a great sign that the company is recovering well from its earlier issues, and could send its stock price higher. If there is no updated guidance and poor earnings results though, the stock could sink lower as investors lose faith in its comeback.
CHIPOTLE MEXICN Price and Consensus
CHIPOTLE MEXICN Price and Consensus | CHIPOTLE MEXICN Quote
Bottom Line
Chipotle has a great deal to prove when it reports its second quarter financial results tomorrow. As the company tries to make a comeback with its customers after food safety issues, it too will need to win back investors who have made the stock fall as far as it has. Chipotle is currently a Zacks Rank #4 (Sell), and will report Thursday after the bell. Many eyes will be on its earnings report, and subsequently on its share price.
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 >>