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Chipotle (CMG) Q1 Earnings Top Despite Coronavirus, Stock Up
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Chipotle Mexican Grill, Inc. (CMG - Free Report) reported first-quarter 2020 results, wherein earnings and revenues surpassed the Zacks Consensus Estimate. While the bottom line beat the consensus estimate for the 10th straight quarter, the top line surpassed the same for the sixth consecutive time. Following the results, the company’s shares gained 5.8% in after-hour trading session on Apr 21.
The company’s adjusted earnings of $3.08 per share surpassed the Zacks Consensus Estimate of $2.50. However, the bottom line declined 9.4% from $3.40 reported in the year-ago quarter.
The decline was primarily due to an increase in restaurant closure costs as well as costs related to restructuring of business due to the COVID-19 crisis. As a result of the pandemic, nearly 100 restaurants were temporarily shut.
Chipotle Mexican Grill, Inc. Price, Consensus and EPS Surprise
Quarterly revenues of $1.4 billion surpassed the consensus mark by 1.2% and improved 7.8% year over year. The upside can primarily be attributed to improvement in comps, digital sales and new restaurant openings. In the quarter under review, Chipotle opened 19 restaurants and closed two, taking the total restaurant count to 2,638.
Digital sales grew 80.8% year over year to $371.8 million during the first quarter of 2020. Digital sales represented 26.3% of sales during the quarter. The company has increased its focus on digital and delivery services as the dine-in facility has been stopped due to the spread of the virus. As a result, digital sales for the month of March grew 102.6% year over year and represented 37.6% of sales.
Comps in the first quarter increased 3.3%, including a benefit of 1.3% related to leap day. The 4.9% increase in average check, which includes a 2.0% benefit from menu price increases that were implemented during 2019, partially offset by a 1.4% decrease in comparable restaurant transactions, also led to the upside.
Costs, Operating Highlights & Net Income
Food, beverage and packaging costs, as a percentage of revenues, increased 60 basis points (bps) to 32.8%, compared to 32.2% reported in the year ago quarter. It was primarily due to an increase in ingredient costs and food expenses related to Chipotle rewards, partially offset by an increase in menu prices and lower paper costs.
Restaurant-level operating margin of 17.6% declined 340 bps from 21% in the year-ago quarter. The downside was primarily due to wage inflation, increased food costs, high marketing and delivery expenses, partially offset by leverage in comps growth. Notably, the sudden change of its business structure due to COVID-19 in March resulted in a short term, outsized impact on labor and food costs.
Adjusted net income in the reported quarter amounted to $87.2 million, compared with $95.5 million in the prior-year quarter.
Balance Sheet
The company has $909.2 million in cash, restricted cash, and short-term investments as of Mar 31, 2020. The company doesn’t have any debt. A strong balance sheet will help the company tide over the coronavirus-induced crisis.
Inventory totaled $23.3 million as of Mar 31, 2020, down from $26.1 million as of Dec 31, 2019. Goodwill, as a percentage of total assets, was 0.4% at the end of the first quarter of 2020.
Other Updates
The company plans to open several new restaurants. However, with a pipeline of 49 restaurants under construction, the company has been experiencing construction delays on majority of its projects due to the spread of coronavirus.
2020 Outlook
Given the level of volatility and uncertainty revolving around the coronavirus impact, the company has withdrawn its 2020 guidance.
Zacks Rank & Key Picks
Chipotle currently carries a Zacks Rank #5 (Strong Sell).
Sprouts Farmers has three-five year earnings per share growth rate of 3.7%
Stamps.com 2021 earnings are expected to rise 5%.
Potbelly has an impressive long-term earnings growth rate of 17.5%.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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Chipotle (CMG) Q1 Earnings Top Despite Coronavirus, Stock Up
Chipotle Mexican Grill, Inc. (CMG - Free Report) reported first-quarter 2020 results, wherein earnings and revenues surpassed the Zacks Consensus Estimate. While the bottom line beat the consensus estimate for the 10th straight quarter, the top line surpassed the same for the sixth consecutive time. Following the results, the company’s shares gained 5.8% in after-hour trading session on Apr 21.
The company’s adjusted earnings of $3.08 per share surpassed the Zacks Consensus Estimate of $2.50. However, the bottom line declined 9.4% from $3.40 reported in the year-ago quarter.
The decline was primarily due to an increase in restaurant closure costs as well as costs related to restructuring of business due to the COVID-19 crisis. As a result of the pandemic, nearly 100 restaurants were temporarily shut.
Chipotle Mexican Grill, Inc. Price, Consensus and EPS Surprise
Chipotle Mexican Grill, Inc. price-consensus-eps-surprise-chart | Chipotle Mexican Grill, Inc. Quote
Revenues & Comparable Restaurant Sales
Quarterly revenues of $1.4 billion surpassed the consensus mark by 1.2% and improved 7.8% year over year. The upside can primarily be attributed to improvement in comps, digital sales and new restaurant openings. In the quarter under review, Chipotle opened 19 restaurants and closed two, taking the total restaurant count to 2,638.
Digital sales grew 80.8% year over year to $371.8 million during the first quarter of 2020. Digital sales represented 26.3% of sales during the quarter. The company has increased its focus on digital and delivery services as the dine-in facility has been stopped due to the spread of the virus. As a result, digital sales for the month of March grew 102.6% year over year and represented 37.6% of sales.
Comps in the first quarter increased 3.3%, including a benefit of 1.3% related to leap day. The 4.9% increase in average check, which includes a 2.0% benefit from menu price increases that were implemented during 2019, partially offset by a 1.4% decrease in comparable restaurant transactions, also led to the upside.
Costs, Operating Highlights & Net Income
Food, beverage and packaging costs, as a percentage of revenues, increased 60 basis points (bps) to 32.8%, compared to 32.2% reported in the year ago quarter. It was primarily due to an increase in ingredient costs and food expenses related to Chipotle rewards, partially offset by an increase in menu prices and lower paper costs.
Restaurant-level operating margin of 17.6% declined 340 bps from 21% in the year-ago quarter. The downside was primarily due to wage inflation, increased food costs, high marketing and delivery expenses, partially offset by leverage in comps growth. Notably, the sudden change of its business structure due to COVID-19 in March resulted in a short term, outsized impact on labor and food costs.
Adjusted net income in the reported quarter amounted to $87.2 million, compared with $95.5 million in the prior-year quarter.
Balance Sheet
The company has $909.2 million in cash, restricted cash, and short-term investments as of Mar 31, 2020. The company doesn’t have any debt. A strong balance sheet will help the company tide over the coronavirus-induced crisis.
Inventory totaled $23.3 million as of Mar 31, 2020, down from $26.1 million as of Dec 31, 2019. Goodwill, as a percentage of total assets, was 0.4% at the end of the first quarter of 2020.
Other Updates
The company plans to open several new restaurants. However, with a pipeline of 49 restaurants under construction, the company has been experiencing construction delays on majority of its projects due to the spread of coronavirus.
2020 Outlook
Given the level of volatility and uncertainty revolving around the coronavirus impact, the company has withdrawn its 2020 guidance.
Zacks Rank & Key Picks
Chipotle currently carries a Zacks Rank #5 (Strong Sell).
Some better-ranked stocks in the Retail-Wholesale sector are Sprouts Farmers Market, Inc. (SFM - Free Report) , Stamps.com Inc. and Potbelly Corporation (PBPB - Free Report) . Sprouts Farmers sports a Zacks Rank #1 (Strong Buy), while Stamps.com and Potbelly carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Sprouts Farmers has three-five year earnings per share growth rate of 3.7%
Stamps.com 2021 earnings are expected to rise 5%.
Potbelly has an impressive long-term earnings growth rate of 17.5%.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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