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Chipotle (CMG) Stock Dips Ahead of Earnings: Should You Buy?
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Shares of Chipotle Mexican Grill (CMG - Free Report) slumped more than 2% in morning trading Monday, just a day before the company is set to report its first-quarter financial results. Is today’s dip a useful warning, or does it offer investors a sweet discount to buy the stock ahead of earnings?
What We Expect
Chipotle has spent most of the past year working to improve its reputation after a series of foodborne illness breakouts linked to its restaurants. The company’s new brand-management efforts, along with various sales-building initiatives like menu innovation, will definitely help restore the Chipotle name, but that doesn’t necessarily translate into a great earnings report right now.
For one, Chipotle’s recent marketing initiatives and new food safety measures have certainly been costly, which could cut into its bottom line. Additionally, the U.S. restaurant space has been less-than-impressive recently.
The restaurant industry belongs to the broader Retail Wholesale sector, and overall first-quarter earnings for this sector are expected to be down 4.8% year over year. According to industry research from TDn2K, the first quarter of 2017 marked the fifth consecutive quarter of negative comparable store sales in the restaurant world.
Our current consensus estimates call for earnings of $1.27 per share and revenues of $1.05 billion. These figures would represent year-over-year growth of 245% and 26%, respectively, but it’s worth noting that these comparisons are favorable due to the fallout of Chipotle’s food-safety scandal landing in the prior-year quarter.
More importantly, our proven model does not conclusively show that Chipotle is likely to beat the Zacks Consensus Estimate for earnings. Chipotle currently has an Earnings ESP of -7.81%, which means that the most recent estimates have come in lower than our consensus. Although the stock’s Zacks Rank #3 (Hold) helps the predictive power of ESP, its negative ESP makes surprise prediction more challenging.
Bottom Line
Today’s small dip ahead of its earnings release may entice some investors, the latest company and industry trends do not point to outright certainty here. Sure, Chipotle will likely post solid earnings and revenue growth, but it’s likely that investors will be more concerned with other figures. For some, this dip is a discount, but for others, it is a sign that investors are rightfully hesitant ahead of Chipotle’s report.
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade, which could in turn save $200 billion in U.S. healthcare costs.
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Chipotle (CMG) Stock Dips Ahead of Earnings: Should You Buy?
Shares of Chipotle Mexican Grill (CMG - Free Report) slumped more than 2% in morning trading Monday, just a day before the company is set to report its first-quarter financial results. Is today’s dip a useful warning, or does it offer investors a sweet discount to buy the stock ahead of earnings?
What We Expect
Chipotle has spent most of the past year working to improve its reputation after a series of foodborne illness breakouts linked to its restaurants. The company’s new brand-management efforts, along with various sales-building initiatives like menu innovation, will definitely help restore the Chipotle name, but that doesn’t necessarily translate into a great earnings report right now.
For one, Chipotle’s recent marketing initiatives and new food safety measures have certainly been costly, which could cut into its bottom line. Additionally, the U.S. restaurant space has been less-than-impressive recently.
The restaurant industry belongs to the broader Retail Wholesale sector, and overall first-quarter earnings for this sector are expected to be down 4.8% year over year. According to industry research from TDn2K, the first quarter of 2017 marked the fifth consecutive quarter of negative comparable store sales in the restaurant world.
Our current consensus estimates call for earnings of $1.27 per share and revenues of $1.05 billion. These figures would represent year-over-year growth of 245% and 26%, respectively, but it’s worth noting that these comparisons are favorable due to the fallout of Chipotle’s food-safety scandal landing in the prior-year quarter.
More importantly, our proven model does not conclusively show that Chipotle is likely to beat the Zacks Consensus Estimate for earnings. Chipotle currently has an Earnings ESP of -7.81%, which means that the most recent estimates have come in lower than our consensus. Although the stock’s Zacks Rank #3 (Hold) helps the predictive power of ESP, its negative ESP makes surprise prediction more challenging.
Bottom Line
Today’s small dip ahead of its earnings release may entice some investors, the latest company and industry trends do not point to outright certainty here. Sure, Chipotle will likely post solid earnings and revenue growth, but it’s likely that investors will be more concerned with other figures. For some, this dip is a discount, but for others, it is a sign that investors are rightfully hesitant ahead of Chipotle’s report.
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade, which could in turn save $200 billion in U.S. healthcare costs.
A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains. Click to see them right now >>