Why Analysts Expect Chipotle’s EPS Growth to Increase in 2019

Is There More Upside to Chipotle’s Stock Price? (Continued from Prior Part) ## Analysts’ EPS expectations for 2018 Chipotle Mexican Grill (CMG) posted adjusted EPS of $7.16 in the first three quarters of 2018, representing a rise of 36.4% from $5.25 in the corresponding three quarters of 2017. Revenue growth of 8.1%, the expansion of its net margins, and share repurchases drove the company’s EPS. During the period, the company’s net margin expanded from 3.9% in the corresponding three quarters of 2017 to 5.5%. A fall in food, beverage, and packaging costs, a fall in other operating costs, and a lower effective tax rate improved Chipotle’s net margin. However, some of the expansion was offset by increased labor costs, general and administrative expenses, and depreciation and amortization expenses. Analysts expect Chipotle to post EPS of $1.32 in the fourth quarter to take its total EPS for 2018 to $8.53, a rise of 29.2% from $6.60 in 2017. In comparison, Shake Shack (SHAK) and McDonald’s (MCD) are expected to post EPS rises of 19.4% and 16.4%, respectively, in 2018. ## Analysts’ 2019 EPS expectations Analysts expect Chipotle to post EPS of $11.96 in 2019, a rise of 40.3% from $8.53 in 2018. Revenue growth and the expansion of its net margin are expected to drive the company’s EPS. In 2019, analysts expect Chipotle’s revenue to rise 7.9% to $5.21 billion. This revenue growth is likely to be driven by the opening of new restaurants and positive same-store sales growth. Management expects to open 140–155 new restaurants in 2019. Chipotle’s net margin is likely to expand from 4.9% in 2018 to 6.3%. This expansion is expected to be driven by the company’s improved gross margin, lower selling, general, and administrative expenses, and lower effective tax rate. During the same period, the EPS of Shake Shack and McDonald’s are expected to rise 7.1% and 6.1%, respectively. Browse this series on Market Realist: * Part 1 - Is There More Upside to Chipotle’s Stock Price? * Part 2 - What Analysts Are Recommending for Chipotle