Chipotle Mexican Grill (CMG) shares are taking a hit on Wednesday following the company’s latest earnings report. While the fast-casual restaurant chain surpassed analyst expectations for adjusted earnings per share (EPS), a slight revenue miss and a cautious outlook from analysts are weighing heavily on investor sentiment.
The company reported sales of $2.79 billion for the third quarter, falling short of analysts’ estimates of $2.82 billion. However, it’s important to note that this figure represents a 13% year-over-year increase, fueled by new restaurant openings and a robust 6% increase in comparable restaurant sales. This growth was driven by a 3.3% rise in transactions and a 2.7% increase in the average check, indicating strong customer demand.
On the earnings front, Chipotle delivered a positive surprise. Adjusted EPS came in at 27 cents, exceeding analysts’ expectations of 25 cents and marking a 17% year-over-year growth. The company also reported a healthy operating margin of 16.9% and a restaurant-level operating margin of 25.5%.
In addition to its strong financial performance, Chipotle highlighted its commitment to growth. The company repurchased $488.1 million of its stock during the third quarter, leaving $1.1 billion available under its share repurchase authorization. The average purchase price for the stock was $54.55, demonstrating confidence in its future prospects.
“Our teams work hard to deliver extraordinary value to our guests as they provide our fresh, delicious and customizable culinary experience, at accessible prices to millions of people every day,” said Scott Boatwright, Interim CEO. “They are the backbone of Chipotle and, together with our support centers, we will continue to execute against our five key strategies that help us win today, while we grow our future. This will help us to achieve our long-term target of reaching 7,000 restaurants in North America and move towards a more global brand.”
Despite the earnings beat, Wall Street analysts have expressed a mix of sentiments. Baird analyst David Tarantino maintained an Outperform rating on Chipotle and raised the price target from $62 to $70. BMO Capital analyst Andrew Strelzik maintained a Market Perform rating on Chipotle and raised the price target from $55 to $56. Barclays analyst Jeffrey Bernstein maintained an Equal-Weight rating on Chipotle and raised the price target from $55 to $60. Wells Fargo analyst Zachary Fadem maintained an Overweight rating on Chipotle and raised the price target from $66 to $67.
As of Wednesday morning, Chipotle stock is trading 6.40% lower at $56.62, reflecting the market’s cautious reaction to the revenue miss and the mixed analyst opinions. Investors will be closely watching how Chipotle navigates the challenging economic environment and whether its growth trajectory remains on track.
