Monthly Restaurant Notes: Chipotle Mexican Grill & McDonald’s

-13.28%
Downside
2936
Market
2546
Trefis
CMG: Chipotle Mexican Grill logo
CMG
Chipotle Mexican Grill

According to a report by Applied Predictive Technologies (APT), restaurant sales increased 1.6% year-over-year (y-o-y) in the U.S. in August 2015, driven by an increase in average spend per visit. Moreover, sales growth in quick service restaurants (QSR) was 3.7%, outpacing the other full-service segments’ growth of 0.4%. [1] Among the regions domestically, West Coast cities turned out to be performing better than the other regions, with higher average checks. Increases in commodity prices and higher labor costs forced most of the restaurants to increase their menu prices.

Here are the updates regarding some of the restaurant companies covered by Trefis:

McDonald’s

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After a horrifying period in the history of the company, McDonald’s is trying to recover from the slowdown in terms of sales and customer traffic in the Asian markets. To cater to people’s changing preferences, the company’s USA and Canada units decided to fully transition to cage-fee eggs for its roughly 16,000 restaurants in these markets. [2] On the other hand, McDonald’s decided to appoint Jano Cabrera, as the new Corporate Senior Vice President of U.S. communications, Global Media and Public Relations. [3]

MCD stock fluctuated between the range of $94 and $98 through the month of September, recovering from the drop on account of the Chinese slowdown. Our price estimate for MCD stock is $99, which is roughly 2% above the current market price.

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Chipotle Mexican Grill

On September 28, Chipotle Mexican Grill announced that its pork shortage, which was troubling one-third of its restaurants in the country, is now over. As a result, Carnitas are back in business in 90% of the affected restaurants, with the remaining restaurants to get Carnitas back in the menu by the end of November. [4] This might help the company improve the comparable sales growth, which is currently the main concern among investors.

CMG stock traded between $710 and $730 throughout the month of September, and is currently trading at $710. Our price estimate for CMG stock is $727, which is roughly 2% above the current market price.

cmg s

 

 

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Notes:
  1. APT Index: August restaurant sales up 1.6%- West coast cities are top performers []
  2. McDonald’s to fully transition to cage-free eggs within 10 years []
  3. McDonald’s names Jano Cabrera Corporate Senior Vice President of U.S. communications, Global Media and Public Relations []
  4. Carnitas returns to 90 percent of Chipotle restaurants []