Chipotle (CMG) Q3 Earnings & Revenues Surpass Estimates

Chipotle Mexican Grill, Inc. CMG reported third-quarter 2019 results, wherein both earnings and revenues surpassed the respective Zacks Consensus Estimate. While the bottom line beat the consensus estimates for the eighth straight quarter, the top line came ahead of the same for the fourth consecutive quarter.

Despite reporting better-than-expected results, the company’s shares declined 2.1% in after-hour trading session on Oct 22 owing to concerns regarding rise in delivery costs.

The company’s adjusted earnings of $3.82 per share surpassed the Zacks Consensus Estimate of $3.20. The bottom line also improved 76.9% from the year-ago quarter, driven by increased revenues and strong operating margins.

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 third quarter.

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

 

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 estimates by 1.8% and improved 14.6% year over year. This upside is primarily attributable to improvement in comps and restaurant openings. In the quarter under review, Chipotle opened 25 restaurants and closed one, taking the total restaurant count to 2,546.

Comps in the third quarter rose 11%, driven by a rise of 7.5% in comparable restaurant transactions and an increase of 3.5% in average check.

Costs, Operating Highlights & Net Income

Food, beverage and packaging costs, as a percentage of revenues, decreased 20 basis points (bps) to 33.2% due to benefit of menu price increases, marginally negated by higher costs of ingredients.

Restaurant-level operating margin was 20.8%, up 210 bps from 18.7% 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 amounted to $98.6 million, up from $38.2 million in the prior-year quarter.

Balance Sheet

Cash and cash equivalents as of Sep 30, 2019, were $386.6 million compared with $250 million as of Dec 31, 2018.

Inventory totaled $23.9 million as of Sep 30, 2019, down from $21.6 million as of Dec 31, 2018. Goodwill, as a percentage of total assets, was 0.4% at the end of the third quarter compared with 1% at the end of 2018.

2019 Outlook

For 2019, management expects comps to grow in a high-single digit. The company estimates effective tax rate between 26% and 29%. It still expects to inaugurate 140-155 restaurants in 2019.

Chipotle carries a Zacks Rank #2 (Buy).

Other Key Picks

Some other top-ranked stocks worth considering in the same space include Brinker International, Inc. EAT, Dunkin' Brands Group, Inc. DNKN and Cracker Barrel Old Country Store, Inc. CBRL. All these stocks carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Brinker International’s earnings have surpassed the Zacks Consensus Estimate in three of the trailing four quarters, with the average being 4.4%.

Dunkin' Brands Group and Cracker Barrel Old Country Store has an impressive long-term earnings growth rate of 9.8% and 10%, respectively.

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