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Chipotle Posts Preliminary Results

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Denver, Colorado-based Chipotle Mexican Grill Inc. (CMG - Free Report) recently declared its preliminary fourth-quarter 2012 results. The company will report detailed fourth quarter and full year 2012 financial results on February 5.

Quarter Highlights

The company projects fourth-quarter 2012 earnings per share between $1.92 and $1.97.  The Zacks Consensus Estimate for the fourth quarter 2012 is $2.10 per share.

Chipotle expects fourth quarter 2012 net revenues to increase 17.2% year on year to $699.2 million, ahead of the Zacks Consensus Estimate of $692 million. The sales in the quarter are likely to be driven by higher comparable restaurant sales (comps). In addition, the company projects that the comps are likely to grow by 3.8% year over year owing to higher traffic.

Further, the restaurant’s operating margin is projected to decline 150 basis points (bps) from year-earlier quarter to 24.6%. Food expenditures are expected to rise 130 bps from the prior-year period to 33.5% of revenue due to the hike in commodity costs. However, the company expects that commodity prices will be stable in 2013.

Other operating costs are expected to be 11.5% of revenue, up sequentially. The cost is likely to be driven by higher marketing and promotional related expenses.

Stores Update

During the quarter, Chipotle launched 60 restaurants.

Management announced that it has achieved significant revenue growth in 2012 driven by record amount of restaurant openings and higher comps.

The company operates quick-casual, fresh Mexican food restaurant chains in 35 states throughout the United States, the District of Columbia and Ontario, Canada.

Earlier in third-quarter of 2012, Chipotle reported revenues of $700.5 million, up 18.4% year over year buoyed by new restaurant openings and higher comparable store sales (comps). The restaurant operating margin expanded 70 bps to 27.4%, attributable to a 60 bps cut in labor, 30 bps drop in occupancy costs, 70 bps decrease in other operating costs and 40 bps slip in food, beverage and packaging costs (as a percentage of total revenue).

Chipotle, which competes with the likes of Tim Hortons Inc. and Brinker International, Inc. (EAT - Free Report) , currently carries a Zacks Rank #3 (Hold). We are maintaining our long-term Neutral recommendation on the stock.

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