Up 17% This Year, Will Higher Pricing Boost Chipotle’s Stock Post Q2 Earnings?
Chipotle Mexican Grill stock (NYSE: CMG), a fast-casual restaurant chain that focuses on fresh and organic ingredients in burritos, salads, and more, is scheduled to report its fiscal second-quarter results on Wednesday, July 24. We expect CMG’s stock to trade higher with revenues and earnings beating the expectations in its second-quarter results. CMG stock has seen a 17% growth year-to-date. In comparison, CMG’s peer McDonald’s (NYSE: MCD) stock is down 12% since the beginning of this year. It should be noted that CMG’s positive performance can be attributed to restaurant-level operating margin expansion, menu innovation, price increases, and good execution of the company’s digital strategies. Of course, the 50-to-1 stock-split announcement has also helped the stock to gain some momentum. Chipotle’s growth is slowing, but still, its profitability is holding up well – thanks to raising prices. For full-year 2024, Chipotle is forecasting mid-to-high single-digit growth in comparable restaurant sales assuming current sales trends continue. In 2024, it counts on opening 285 to 315 new restaurants with over 80% having Chipotlane (drive-thru). Chipotle has a thriving rewards program that facilitates digital ordering (made up 37% of revenue in 2023) and the company’s rewards program topped 40 million members (as of Q1 2024).
In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Consumer Discretionary sector including AMZN, TSLA, and HD, and even for the megacap stars GOOG, MSFT, and AAPL. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could CMG face a similar situation as it did in 2021 and 2022 and underperform the S&P over the next 12 months – or will it see a strong jump?
Our forecast indicates that Chipotle’s valuation is $66 per share, almost 23% higher than the current market price. Look at our interactive dashboard analysis on Chipotle Earnings Preview: What To Expect in Q2? for more details.
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(1) Revenues expected to come in above the consensus estimates
Trefis estimates Chipotle’s Q2 2024 revenues to be around $3.1 Bil, well above the consensus estimate. In Q1, Chipotle’s revenue grew 14% y-o-y to $2.7 billion, on the back of 7% growth in comparable restaurant sales (outlets in operation for 13 calendar months at a minimum). Its average restaurant sales rose 7% year-over-year (y-o-y) to $3.1 million in Q1, despite adding 47 new restaurants over the same period. It continues to post healthy sales and profitability growth in the first quarter, which is a big step in the right direction for the popular Tex-Mex chain. We also forecast Chipotle’s Revenues to be $11.4 billion for the fiscal year 2024, up 15% y-o-y.
2) EPS is also likely to beat consensus estimates
Chipotle’s Q2 2024 earnings per share (EPS) is expected to come in at 34 cents per Trefis analysis, beating the consensus estimate. The company’s edigital arnings per share rose 27% y-o-y to $13.37 in Q1. Chipotle’s highest-margin sales are orders, so momentum on this front serves the business well for continued profit growth in the long run.
(3) Stock price estimate higher than the current market price
We have revised Chipotle’s Valuation to $66 per share (from a previous (pre-split) $2794), based on a $1.12 expected EPS (post-split) and a 58.8x P/E multiple for the fiscal year 2024 – almost 23% higher than the current market price.
It is helpful to see how its peers stack up. CMG Peers shows how Chipotle’s stock compares against peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.
| Returns | Jul 2024 MTD [1] |
2024 YTD [1] |
2017-24 Total [2] |
| CMG Return | -15% | 17% | 609% |
| S&P 500 Return | 1% | 15% | 146% |
| Trefis Reinforced Value Portfolio | 2% | 8% | 669% |
[1] Returns as of 7/22/2024
[2] Cumulative total returns since the end of 2016
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