Chipotle Mexican Grill Collapse 26 Percent In February amid health scares but there are signs of some improvement. We reiterate our ongoing cautious view of Hold-rated CMG on an expected -3% lower opening after CMG announced another negative mid-1Q16 business update, which included: (1) -310bps worse Feb16 monthly comps of -26.1% (vs. cons’ -23%E); and (2) -$1.03 below-consensus 1Q16 EPS guidance of “a loss of $1.00 or worse” (vs. cons’ $0.03E; mgt’s prior guidance of “about break even”). Today we reduce our 1Q16/2016/2017 EPS estimates to -$1.00E/$5.00E/$13.00E (vs. cons’ prior $0.03E/$8.17E/$14.63E) based on our updated 1Q16/2016/2017 comp estimates of -28%E/-16%E/+8%E (vs. cons’ prior -25.6%E/-9.9%E/+7.6%E), says a report from Stifel.

BMO opines on Chipotle Mexican Grill

We hosted a breakfast with food safety specialist, Dr. Randy Worobo, to gain insights into food safety and supply chain issues across the food industry, with a focus on Chipotle. Dr. Worobo has spent the past 20 years researching food safety and advising companies throughout the food and beverage supply chain on food safety issues and solutions. Dr. Worobo is not associated with Chipotle.
Impact & Analysis
Dr. Worobo provided a cautious perspective on Chipotle that highlighted a level of continued food safety risk and potential incremental cost headwinds. The views were Dr. Worobo’s only, yet the perspective at the very least continues tobuild our understanding of key food safety issues Chipotle faces as we continue to consider future risk factors.

Chipotle Mexican Grill – Sterne Agee CRT on the other hand states:

We are lowering our Q1:16 EPS estimate from $0.11 to a loss of -$0.27 to mostly reflect a more conservative same-store sales (SSS) assumption of -32% (Street low). Based on our channel checks, we have seen an improvement in traffic vs. January lows. However, given a high level of coupon redemption, we believe that a lower check could offset the traffic gain, resulting in potentially disappointing SSS. We continue to believe the pace of traffic recovery is the most significant driver of near-term stock performance, although “real” traffic (ex. coupons) is difficult for us to decipher at this time. As such, we remain on the sidelines with a Neutral rating. In terms of valuation, shares are presently trading at 40x our 2017 EPS estimate.

Chipotle Mexican Grill CMG
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