Analysts are optimistic about Chipotle Mexican Grill’s upcoming fourth-quarter earnings report. According to FactSet consensus estimates, the company is expected to post earnings of $9.71 per share on $2.49 billion in revenue. Additionally, same-store sales, which measure sales of stores open for more than a year, are anticipated to rise by 7.1%.
The Street’s confidence in Chipotle’s ability to meet these targets has been steadily growing. In the past week, earnings estimates have been adjusted 0.2% higher, and over the past three months, they have risen by 1.5%, as reported by FactSet.
In a recent note, Sharon Zackfia, an analyst at William Blair, expressed her belief in Chipotle’s ability to maintain both healthy sales and earnings growth. She stated, “We believe the visibility on Chipotle maintaining both healthy sales and earnings growth is among the best in publicly traded restaurants.”
Chipotle’s earnings will be released after the market closes on Tuesday, followed by a call with investors scheduled for 4:30 p.m. Eastern time.
Throughout this year, Chipotle’s shares have experienced an 8.3% increase, outperforming the 3.8% gain of the S&P 500 and the 2% gain achieved by the AdvisorShares Restaurant ETF.
However, it is important to note that the market’s optimism can also present a challenge. Chipotle is considered an expensive stock, with its shares currently trading at 45.6 times forward earnings, significantly higher than its competitors. For comparison, the AdvisorShares Restaurant ETF had a P/E ratio of 23.2. With such high multiples, the stock is priced for perfection, meaning investors will not accept anything less than an outstanding report.
A Promising Quarter for Chipotle
Encouragingly for Chipotle, the fourth quarter of last year showed positive signs of growth. Despite the rest of the fast food industry experiencing a decline of 1.6%, Chipotle saw a 4.3% increase in foot traffic during this period, according to data from Placer.ai. This indicates that Chipotle is outperforming its competitors in terms of attracting customers.
Moreover, Chipotle still has the potential to raise prices in order to offset higher labor costs and other expenses. This could have a positive impact on the company’s profitability and overall financial performance.
UBS analyst Dennis Geiger recognizes the momentum and growth opportunities Chipotle possesses. In a recent note, he mentioned that the company deserves a premium valuation due to its favorable prospects for traffic and margin gains up until 2024. Geiger also emphasized the brand’s reliability when it comes to delivering consistent growth.
However, there is a slight concern that Chipotle may revise its guidance for the first fiscal quarter slightly lower. This adjustment would reflect a slowdown in restaurant industry sales, particularly in January, which experienced colder weather than expected. Nevertheless, it is possible that the market has already accounted for this factor in its evaluation of the company.
As noted by analyst Jon Tower from Citi, it shouldn’t come as a surprise to investors that Chipotle experienced a year-over-year drop in the start of FY24 due to weather-related factors.
Overall, Chipotle’s performance in the fourth quarter indicates a promising future for the company. With its strong traffic numbers and potential for further growth, Chipotle remains one of the best-positioned brands in the sector.