Chipotle Mexican Grill, Inc. Stock Jumps After Impressive Earnings

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Chipotle Mexican Grill, Inc. Stock Jumps After Impressive Earnings
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Terming Chipotle Mexican Grill, Inc. (NYSE:CMG)’s 2Q results as one of the most impressive earnings reports in the restaurant industry in recent memory, Sterne Agee analysts have assigned a Buy rating and pegged the company’s price target at $742.

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Lynne Collier and Wesley Carmichael of Sterne Agee in their flash note dated July 21, 2014 point out that Chipotle Mexican Grill, Inc. (NYSE:CMG)’s EPS of $3.50 well exceeded their forecast of $3.02.

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Chipotle Mexican Grill reports impressive results

As reported earlier, Chipotle Mexican Grill, Inc. (NYSE:CMG), which operates Chipotle Mexican Grill restaurants, released the results from its most recently completed quarter last night, posting earnings of $3.50 per share on revenue of $1.05 billion. Analysts had been expecting the fast casual chain to report earnings of $3.09 per share on $988.13 million in revenue.

Chipotle Mexican Grill, Inc. (NYSE:CMG)’s revenue increased 28.6% year-over-year, while comparable restaurant sales rose 17.3%. The fast casual chain reported that increased traffic and a small increase in average check size drove growth in comparable restaurant sales. CMG also noted a benefit from its recent price increases, which it finished rolling out by the end of the quarter.

Surge in stock price

Reflecting the strong performance clocked in the second quarter, Chipotle Mexican Grill, Inc. (NYSE:CMG)’s stock rose over 12% to $660.83 during early morning trading today.

The Sterne Agee analysts say that Chipotle Mexican Grill, Inc. (NYSE:CMG)’s comps are expected to grow in the mid-teens in FY14. The analysts point out that revenues of $1.05 billion came in well above their expectation of $978.7 million, thanks to impressive same-store sales growth.

Moreover, Chipotle Mexican Grill’s restaurant-level margin of 27.3% came in about 100 basis points above their estimate of 26.3%, as results were favorable on every line item except other operating expenses, compared to their expectations. The Sterne Agee analysts pegged EPS estimates for CMG at $12.65 and $16.28 respectively for 2014 and 2015.

The following table captures the Sterne Agee analysts’ estimates:

CMG's earnings variance

Echoing a similar tone, other analysts too have enhanced their price target on Chipotle Mexican Grill, Inc. (NYSE:CMG). Piper Jaffray increased its target price on shares of CMG from $610 to $740, indicating a potential upside of 25.44%. Moreover, analysts at Jefferies Group raised their price target on CMG shares from $535 to $600, while analysts at Oppenheimer raised their price target on the stock from $625 to $700.

Analysts at RBC Capital too raised their price target on the fast casual chain’s shares, bumping it up from $680 to $730 per share.

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Mani is a Senior Financial Consultant. He has worked in Senior Management role in large banking, financial and information technology organizations. He has provided solutions for major banking and securities firms across the globe in the area of retail, corporate and investment banking. He holds MBA (Finance) and Professional Management Accounting Qualifications. His hobbies are tracking global financial developments and watching sports
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