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Chipotle (CMG) Q1 Earnings & Revenues Top Estimates, Stock Up

Chipotle Mexican Grill, Inc. CMG reported first-quarter 2023 results, with earnings and revenues beating the Zacks Consensus Estimate. The top and the bottom line increased on a year-over-year basis. Following the announcement, shares of the company moved up 7.9% during the after-hours trading session on Apr 25.

Brian Niccol, chairman and CEO, Chipotle, stated, "Our strong performance in the first quarter confirms that our focus on getting back to the basics and re-establishing Chipotle's standards of excellence is beginning to drive results. We will continue to develop exceptional people and prepare exceptional food while treasuring each guest to further strengthen our foundation for sustained long-term growth."

Q1 Earnings & Revenue Discussion

In the quarter under review, Chipotle reported adjusted earnings per share (EPS) of $10.50, beating the Zacks Consensus Estimate of $8.89. The bottom line increased 84.2% from the $5.70 reported in the year-ago quarter.

Chipotle Mexican Grill, Inc. Price, Consensus and EPS Surprise

 

Chipotle Mexican Grill, Inc. Price, Consensus and EPS Surprise
Chipotle Mexican Grill, Inc. Price, Consensus and EPS Surprise

Chipotle Mexican Grill, Inc. price-consensus-eps-surprise-chart | Chipotle Mexican Grill, Inc. Quote

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Quarterly revenues of $2,368.6 million beat the consensus mark of $2,337 million. The top line increased 17.2% on a year-over-year basis. The upside can primarily be attributed to strong comparable restaurant sales growth and new restaurant openings. In the quarter under review, Chipotle opened 41 new restaurants.

Digital sales contributed 39.3% to total food and beverage revenues. During the first quarter, comparable restaurant sales increased 10.9% year over year, following growth of 5.6% (in fourth-quarter 2022), 7.6% (in third-quarter 2022), 10.1% (in second-quarter 2022) and 9% (in first-quarter 2022).

Costs, Operating Highlights & Net Income

During first-quarter 2023, food, beverage and packaging costs, as a percentage of revenues, came in at 29.2%, down 180 basis points (bps) year over year. The cost improvement was backed by menu price increases and lower avocado prices. This was partially offset by higher costs in dairy, tortillas, salsa, beans and rice.

During the reported quarter, the restaurant-level operating margin came in at 25.6%, up from 20.7% reported in the year-ago quarter. The uptick was primarily backed by sales leverage benefits, lower avocado prices and lower delivery fees. However, this was partially offset by wage inflation and higher food costs.

Adjusted net income in the reported quarter amounted to $291.6 million compared with $161.4 reported million in the prior-year quarter.

Balance Sheet

As of Mar 31, 2023, the company reported cash and cash equivalent of $409.7 million compared with $384 million as of Dec 31, 2022.

Inventory totaled $34.6 million as of Mar 31, 2023, compared with $35.7 million as of Dec 31, 2022. Goodwill (as a percentage of total assets) came in at 0.3% at the end of the first quarter of 2023.

During the first quarter, the company repurchased $131.6 million worth of stock at an average price of $1,552.9. As of Mar 31, the company had approximately $282.3 million available for the buyback program.

2023 Outlook

For second-quarter and full-year 2023, the company expects comps growth in the mid to high-single digit range.

The company expects to open 255 to 285 new restaurants in 2023. It expects a 2023 tax rate in the range of 25-27%.

Zacks Rank & Key Picks

Chipotle currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Zacks Retail-Wholesale sector are Arcos Dorados Holdings Inc. ARCO, Chuy's Holdings, Inc. CHUY, and Darden Restaurants, Inc. DRI.

Arcos Dorados currently sports a Zacks Rank #1 (Strong Buy). ARCO has a long-term earnings growth of 7.8%. Shares of the company have gained 6.9% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Arcos Dorados’ 2024 sales and EPS suggests growth of 7.8% and 14.7%, respectively, from the year-ago period’s levels.

Chuy’s Holdings carries a Zacks Rank #2 (Buy). CHUY has a trailing four-quarter earnings surprise of 19.1%, on average. Shares of CHUY have increased 36.2% in the past year.

The Zacks Consensus Estimate for Chuy’s Holdings 2023 sales and EPS suggests growth of 10.8% and 19%, respectively, from the year-ago period’s levels.

Darden carries a Zacks Rank #2. DRI has a long-term earnings growth rate of 10.1%. The stock has gained 11.3% in the past year.

The Zacks Consensus Estimate for Darden’s 2024 sales and EPS suggests growth of 5.4% and 9.9%, respectively, from the year-ago period’s reported levels.

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