Chipotle Mexican Grill Inc. is scheduled to report third-quarter earnings on Thursday after the closing bell, and analysts differ on the fast-casual chain’s prospects for this quarter and moving forward.
On the bearish side, there are those like Wedbush analysts who expect a same-store sales miss. The FactSet consensus is for 5% same-store sales growth. Chipotle CMG, -4.90% has beaten the FactSet same-store sales consensus the last three quarters. Wedbush maintained its underperform stock rating but cut its price target to $380 from $445.
And the UBS Evidence Lab analysis of customer reviews shows a decline after reports of a food-related illness incident in July.
“We believe trends likely need to show more significant improvement from challenged levels before an accelerated sales recovery,” wrote UBS analysts led by Dennis Geiger in a note.
UBS rates Chipotle shares sell with a $370 price target.
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And for the bulls, there was an RBC Capital Markets upgrade on Monday, with analysts led by David Palmer moving shares to outperform from sector perform and raising the price target to $510 from $450.
While RBC expects lackluster third-quarter results, they’re optimistic about same-store sales growth further down the line.
“Our survey work demonstrates significant upside from menu and digital/delivery opportunities – and we believe this management team will increasingly execute against these in 2019,” the note said. “While we expect quarter-to-quarter sales volatility throughout this turnaround, we believe new management will grow same-store sales.”
Chipotle has an average hold stock rating and average price target of $460.39, according to 33 analysts polled by FactSet.
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Here’s what to expect:
Earnings: Chipotle is expected to report earnings of $2.01 per share, according to FactSet, up from $1.33 last year.
Estimize, which crowdsources estimates from sell-side and buy-side analysts, hedge-fund managers, executives, academics and others, expects 2.10 per share.
Chipotle has beaten FactSet’s earnings expectations the last three quarters.
Revenue: FactSet and Estimize expects revenue of $1.24 billion, up from $1.13 billion in the same period last year.
Chipotle beat the FactSet revenue consensus the last two quarters, but missed for the three quarters prior.
Stock price: Chipotle shares are down 8.6% for the past three months, but have rallied nearly 43% over the year to date.
The S&P 500 index SPX, -3.09% is down 0.7% for 2018 so far.
Other issues:
-SunTrust Robinson Humphrey analysts think sales drivers will save Chipotle.
“[G]iven Chipotle’s many sales drivers, we remain confident that same-store sales will recover and stay strong in ’19 and ’20,” analysts wrote in a note. “In addition to a tailwind from improved service levels, we expect same-store sales to be driven by new food news and promotions.”
Among the items of note on a list provided by SunTrust are a chorizo limited-time offer, large guacamole, a September test of bacon in California, and an October test of nachos in Colorado and Minnesota.
SunTrust rates Chipotle shares buy with a $510 price target.
-Stifel analysts expect Chipotle to report “its best traffic quarter in more than a year, thanks, in part, to digital channel growth, given improved customer convenience (pickup shelf installation) and better delivery coverage.”
FactSet expects a 0.5% traffic decline.
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Stifel rates Chipotle shares hold.
-The UBS Evidence Lab analysis also indicates growth cannibalization, “not surprising given the company’s focus on more selective site selection in stronger markets.”
UBS looked at stores that have another location within five-to-10 minutes away.
“At a five-minute drive time, ~18% of Chipotle’s store base faces competition from another Chipotle,” the report said. “At a 10-minute drive time ~71% of Chipotle’s store base faces competition from another Chipotle, up ~500 basis points from 2015.”
