Chipotle Mexican Grill stock (NYSE: CMG), a fast-casual restaurant chain that focuses on recent and natural substances in burritos, salads, and extra, is scheduled to report its fiscal first-quarter outcomes on Wednesday, April 24. We count on CMG’s inventory to commerce decrease with revenues and earnings lacking the expectations marginally in its first-quarter outcomes. The corporate’s inventory is up 25% year-to-date. Chipotle’s sturdy monetary efficiency and the latest inventory cut up announcement have led to inventory features. Chipotle’s development is slowing, however nonetheless, its profitability is holding up properly – because of elevating costs. CMG’s constructive efficiency could be attributed to restaurant-level working margin enlargement, menu innovation, worth will increase, and good execution of the corporate’s digital methods. For 2024, administration expects comparable gross sales development within the mid-single-digit vary and 285 to 315 new restaurant openings. Chipotle has a thriving rewards program that facilitates digital ordering (made up 37% of income in 2023) and the corporate’s rewards program topped 36 million members in 2023.Chipotle not too long ago introduced a 50-for-1 inventory cut up. The inventory cut up will probably be topic to shareholder approval at Chipotle’s annual assembly on June 6. If accredited, shareholders on file as of June 18 will obtain an extra 49 shares for every share held after market shut on June 25. Whereas the inventory cut up gained’t change the worth of Chipotle’s enterprise, it could deliver present share costs down from almost $2,870 (as of writing) to about $57. Which means – for every share of Chipotle inventory an investor owns, post-split shareholders will personal 50 shares value ~$57 every. This makes it extra approachable for retail traders, and with extra individuals capable of afford shares, demand for the inventory might rise.
CMG inventory has seen extraordinarily sturdy features of 105% from ranges of $1385 in early January 2021 to round $2870 now, vs. a rise of about 30% for the S&P 500 over this roughly 3-year interval. Nevertheless, the rise in CMG inventory has been removed from constant. Returns for the inventory have been 26% in 2021, -21% in 2022, and 65% in 2023. Compared, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that CMG underperformed the S&P in 2021 and 2022. The truth is, persistently beating the S&P 500 – in good occasions and unhealthy – has been troublesome over latest years for particular person shares; for heavyweights within the Shopper Discretionary sector together with AMZN, TSLA, and TM, and even for the megacap stars GOOG, MSFT, and AAPL. In distinction, the Trefis High Quality (HQ) Portfolio, with a group of 30 shares, has outperformed the S&P 500 every year over the identical interval. Why is that? As a bunch, HQ Portfolio shares supplied higher returns with much less threat versus the benchmark index; much less of a roller-coaster journey as evident in HQ Portfolio performance metrics. Given the present unsure macroeconomic surroundings with excessive oil costs and elevated rates of interest, might CMG face an analogous state of affairs because it did in 2021 and 2022 and underperform the S&P over the subsequent 12 months – or will it see a robust leap?
Our forecast signifies that Chipotle’s valuation is $2546 per share, nearly 11% decrease than the present market worth. Take a look at our interactive dashboard evaluation on Chipotle Earnings Preview: What To Anticipate in Q1? for extra particulars.
(1) Revenues anticipated to barely are available under the consensus estimates
Trefis estimates Chipotle’s Q1 2024 revenues to be round $2.6 Bil, barely under the consensus estimate. Chipotle noticed a 14% y-o-y income development in 2023 to $9.9 billion, as comp restaurant gross sales grew 7.9%. A lot of this development could be attributable to new areas. For the total 12 months of 2024, we forecast Chipotle’s Revenues to be $11.4 billion, up 15% y-o-y.
The corporate’s working margin expanded from 13.4% in 2022 to fifteen.8% in 2023 whereas the restaurant-level working margin jumped from 23.9% in 2022 to 26.2% in 2023. The corporate opened 271 new areas (of which 88% featured Chipotlane drive-through) in 2023 and operated greater than 3,400 eating places as of the tip of the 12 months. Nevertheless, it sees a possibility for 7,000 eating places in North America. Within the U.S., Chipotle is pretty saturated in city areas, nevertheless it has been increasing into suburbs in addition to internationally, particularly in Canada. It additionally signed its first-ever franchise settlement with a Center Jap operator to open shops in Dubai and Kuwait. The worldwide enlargement will most likely proceed for a very long time if its idea is profitable with different cultures.
2) EPS can also be more likely to miss consensus estimates marginally
Chipotle’s Q1 2024 earnings per share (EPS) is anticipated to come back in at $11.60 per Trefis evaluation, lacking the consensus estimate marginally. The corporate’s diluted earnings per share soared 38% y-o-y to $44.34 in 2023. It must be famous that Chipotle’s highest-margin gross sales are digital orders, so momentum on this entrance serves the enterprise properly for continued revenue development in the long term.
(3) Inventory worth estimate decrease than the present market worth
Going by our Chipotle Valuation, with an EPS estimate of round $54.21 and a P/E a number of of 47.0x in fiscal 2024, this interprets right into a worth of $2546, which is sort of 11% decrease than the present market worth. As of this writing, Chipotle trades at a P/E ratio of 67x – which is pricey in our view. That compares to a P/E ratio of 24x P/E ratio for McDonald’s (NYSE: MCD) and 23x for Starbucks (NASDAQ: SBUX). CMG inventory has skilled an infinite surge since its backside in October 2023 and has but to expertise any significant retracement.
It’s useful to see how its friends stack up. CMG Friends exhibits how Chipotle’s inventory compares towards friends on metrics that matter. One can find different helpful comparisons for corporations throughout industries at Peer Comparisons.
| Returns | Apr 2024 MTD [1] |
2024 YTD [1] |
2017-24 Whole [2] |
| CMG Return | -1% | 25% | 660% |
| S&P 500 Return | -5% | 4% | 122% |
| Trefis Bolstered Worth Portfolio | -8% | -2% | 598% |
[1] Returns as of 4/22/2024
[2] Cumulative whole returns for the reason that finish of 2016
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The views and opinions expressed herein are the views and opinions of the writer and don’t essentially replicate these of Nasdaq, Inc.
