Yahoo Finance Chipotle (CMG) Up 0.9% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Chipotle Mexican Grill (CMG). Shares have added about 0.9% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Chipotle due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Chipotle Q1 Earnings & Revenues Beat Estimates, Rise Y/Y
Chipotle released first-quarter 2024 results, with earnings and revenues beating the Zacks Consensus Estimate. The top and the bottom line increased on a year-over-year basis.
During the quarter, the company reported benefits from enhanced throughput and effective marketing initiatives like Braised Beef Barbacoa and Chicken Al Pastor, leading to strong sales and transaction growth. The company stated that the momentum continued into April.
Q1 Earnings & Revenue Discussion
In the quarter under review, Chipotle reported adjusted earnings per share (EPS) of $13.37, outpacing the Zacks Consensus Estimate of $11.63. The bottom line increased 27.3% from $10.50 reported in the year-ago quarter.
Quarterly revenues of $2.7 billion surpassed the consensus mark of $2.68 billion by 1%. The top line rose 14.1% on a year-over-year basis on the back of strong comparable restaurant sales growth and new restaurant openings. In the reported quarter, Chipotle opened 47 new restaurants with 43 locations, including a Chipotlane and reported solid performances in terms of new restaurant sales, margins and returns.
Digital sales contributed 36.5% to total food and beverage revenues.
Comparable restaurant sales rose 7% year over year compared with 8.4% growth reported in the previous quarter. Our estimate was pegged at 4.7%.
Costs, Operating Highlights & Net Income
During first-quarter 2024, food, beverage and packaging costs, as a percentage of revenues, came in at 28.8%, down 40 basis points year over year. The upside can be primarily attributed to menu price increases implemented since October 2023. This was partially offset by beef and produce inflation and a challenge in the protein mix resulting from the Braised Beef Barbacoa marketing initiative. We suggested the metric to be 29.2%.
During the quarter under discussion, the restaurant-level operating margin reached 27.5%, up from 25.6% a year ago. The uptick was driven by the benefit of sales leverage, partly mitigated by wage and ingredient inflation. We predicted the metric to be 25.5%.
Adjusted net income in the reported quarter amounted to $369.3 million, up 26.6% year over year. Our estimate for the metric was $308.2 million.
Balance Sheet
As of Mar 31, 2024, the company reported cash and cash equivalents of $727.4 million compared with $560.6 million as of Dec 31, 2023.
As of Mar 31, 2024, inventory totaled $37.9 million compared with $39.3 million as of Dec 31, 2023. Goodwill (as a percentage of total assets) reached 0.3% at the end of the first quarter of 2024.
During the first quarter, CMG repurchased $25 million worth of stock at an average price of $2,320. As of Mar 31, the company had approximately $399.1 million available for the buyback program.
Outlook
For 2024, management expects comps growth in the mid to high-single-digit range.
CMG anticipates to open 285-315 new restaurants in 2024. It suggests a 2024 tax rate in the range of 25-27%.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
VGM Scores
At this time, Chipotle has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Chipotle has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Chipotle Mexican Grill, Inc. (CMG) : Free Stock Analysis Report
