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Chipotle (CMG) Shares Gain on Q2 Earnings & Revenue Beat

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Chipotle Mexican Grill, Inc. (CMG - Free Report) reported better-than-expected results in the second quarter of 2019. Its adjusted earnings of $3.99 per share surpassed the Zacks Consensus Estimate of $3.69 by 8.1%. The bottom line also grew 39% from the year-ago quarter, backed by increased revenues and strong operating margins.

Shares of Chipotle increased 3.4% in after-hour trading on Jul 23. In a year, the stock has gained 64.5%, outperforming 36.4% rally of the industry.

Chipotle’s increased focus on augmenting customer experience by introducing food-safety programs, various sales-building initiatives and greater digital innovation resulted in revenue growth in the second quarter.


Revenues and Comparable Restaurant Sales

Quarterly revenues of $1.4 billion surpassed the consensus estimate by 2.1% and grew 13.2% year over year. This upside is primarily attributable to improvement in comps and restaurant openings. In the quarter under review, Chipotle opened 20 restaurants and closed one, bringing the total restaurant count to 2,523.

Comps in the second quarter rose 10%, driven by 7% rise in comparable restaurant transactions and a 3.5% increase in average check, offset by a 40 basis point (bps) of negative impact of deferred revenues from the Chipotle Rewards loyalty program.

Costs, Operating Highlights & Net Income

Food, beverage and packaging costs, as a percentage of revenues, increased 110 basis points (bps) to 33.7% due to increased costs of avocados and dairy products, partially offset by the benefit of menu price increases.

Restaurant-level operating margin was 20.9%, up 120 bps from 19.7% in the year-ago quarter. This upside was primarily driven by comps growth, partially offset by wage inflation, increased food costs, and marketing and delivery expenses.

Net income in the reported quarter summed $91 million, up from $46.9 million in the prior-year quarter.

Chipotle Mexican Grill, Inc. Price, Consensus and EPS Surprise


Balance Sheet

Cash and cash equivalents as of Jun 30, 2019, were $299.9 million compared with $250 million as of Dec 31, 2018.

Inventory totaled $21.1 million as of Jun 30, 2019, down from $21.6 million as of Dec 31, 2018. Goodwill, as a percentage of total assets, was 0.5% at the end of the second quarter compared with 1% at the end of 2018.

2019 Outlook

For 2019, management expects comps to grow in a high-single digit compared with the previous guidance of mid to high-single-digit range. The company estimates effective tax rate between 26% and 29%. It still expects to launch 140-155 restaurants in 2019.

Zacks Rank & Peer Release

Chipotle currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Darden (DRI - Free Report) reported fourth-quarter fiscal 2019 results, wherein earnings surpassed the Zacks Consensus Estimate, whereas revenues lagged the same. Adjusted earnings of $1.76 per share beat the Zacks Consensus Estimate of $1.73. Moreover, the bottom line increased 26.6% year over year on higher revenues.

Domino’s (DPZ - Free Report) reported mixed second-quarter 2019 financial numbers, wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same. Adjusted earnings were $2.19 per share, which outpaced the Zacks Consensus Estimate of $2.00. The metric also increased 19% 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.

Upcoming Peer Releases

Starbucks (SBUX - Free Report) is scheduled to report third-quarter fiscal 2019 earnings on Jul 25. The Zacks Consensus Estimate for the company’s earnings in the quarter is pegged at 72 cents, indicating a 16.1% increase from the year-ago quarter’s reported figure.

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