Why Is Chipotle (CMG) Stock Moving Higher?

Shares of Chipotle Mexican Grill CMG surged more than 5% in early morning trading Wednesday, adding to the fast-casual chain’s prior-day momentum that was inspired by another key addition to the company’s management team.

Just a few weeks after hiring former Taco Bell chief Brian Niccol as its new CEO, Chipotle is bringing another executive from the Mexican-themed fast-food company on board. Chris Brandt, who led marketing efforts at Taco Bell for years, will take over as Chipotle’s chief marketing officer next month.

The move underscores what many investors thought would be the case after Niccol’s hire: faced with a tarnished brand reputation, Chipotle would take inspiration from Taco Bell, a restaurant that has very little in common with the fast-casual company outside of their chosen regional cuisines.

Taco Bell has earned a reputation for zany dishes, out-of-the-box advertising, and low-budget food. Meanwhile, Chipotle prides itself on high-quality, locally-sourced ingredients and sustainable operating policies.

But for Niccol and Brandt, the task of repairing Chipotle’s reputation after multiple food-safety scandals is one that demands diverse experiences.

“Having worked with Chris in the past, I have seen first-hand his ability to generate sales overnight and build brands over time, Niccol said in a statement. “[His experience fits in] as we look to reinvigorate this exceptional brand, and build sales, transactions and profitability.”

Customers around the U.S. have lost their faith in Chipotle in the wake of several foodborne-illness outbreaks linked to its restaurants, dating all the way back to 2015. Since then, the company’s stock has tumbled significantly, falling more than 50% from its all-time highs.

Chipotle was able to turn things around a bit in 2017, with full-year revenues improving by nearly 15% on the back of 6.4% comps growth. However, those year-over-year comparisons were made easier by the company’s dismal 2016 results, and investors did not reward the company for its efforts.

Analyst sentiment for CMG remains poor. Within the past 60 days, we have witnessed 16 revisions for Chipotle’s 2018 EPS estimates, with 100% agreement to the downside. The Zacks Consensus Estimate has slipped a total of $1.47 in that time.

This sluggish earnings outlook has earned the stock a Zacks Rank #4 (Sell). Nevertheless, CMG sports a “B” grade for Growth as year-over-year figures should continue to improve.

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