What To Expect From Chipotle’s Stock Post Q1?

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CMG: Chipotle Mexican Grill logo
CMG
Chipotle Mexican Grill

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 first-quarter results on Tuesday, April 26. We expect CMG’s stock to trade higher due to revenues and earnings beating expectations in its first-quarter results. Chipotle has continued to grow its business at a robust pace even in the face of a pandemic and the current inflation. Thanks to a strong digital presence, the company has continued to post double-digit same-store sales growth while also opening new locations. The company’s total revenue was 26% higher year-over-year (y-o-y) in 2021 on a 19.3% rise in comparable-store growth. Also, the popular Tex-Mex chain’s digital sales increased 25% y-o-y and made up nearly half of its sales (46%) in 2021. In addition, the adjusted EPS reached a record $25.42 in 2021, up from $10.73 in 2020, and up 81% from $14.05 in 2019. That said, the company continues to expect stellar results in 2022 as well, driven by the opening of new locations, same-store sales projections in the mid-to-high single-digits, and the ability to increase prices if inflation remains unabated.

Chipotle expects comp sales growth to slow to a single-digit pace in the first quarter. Nonetheless, that is indicative of a weak start to the year, as low temperatures and an omicron wave slowed comp sales growth to around 5% in January. However, the company anticipates sales growth to pick up in the coming months. It also expects underlying margin performance to strengthen during 2022, despite some near-term volatility.

Our forecast indicates that Chipotle’s valuation is $1930 per share, which is 30% higher than the current market price. Look at our interactive dashboard analysis on Chipotle Earnings Preview: What To Expect in Fiscal Q1? for more details.

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(1) Revenues expected to be slightly ahead of consensus estimates

Trefis estimates Chipotle’s Q1 2022 revenues to be around $2 Bil, marginally ahead of the consensus estimate. In Q4, Chipotle’s revenue grew 22% y-o-y to $1.96 billion, on a 15.2% comparable sales increase. Firing that growth was new menu items, price increases, and digital options. Surprisingly, digital sales grew 3.8% from the same quarter in 2020 when dining restrictions were still common in many places. Chipotle implemented a roughly 4% price increase toward the end of Q4, putting current menu prices about 10% higher than they were a year ago. These price increases should help the company more than offset the rising cost of food, employees, and transport that it expects in 2022. For the full year of 2022, we forecast Chipotle’s Revenues to be $8.9 billion, up 17% y-o-y.

Earlier this month, Chipotle announced it would offer Pollo Asado on its menu in the U.S., at a cost of $9.11 per item, $0.65 more than adobo chicken. With a new menu item, current customers could become more engaged and this may also attract new customers, in addition to helping to drive sales growth.

2) EPS is also likely to be slightly ahead of consensus estimates

Chipotle’s Q1 2022 earnings per share (EPS) is expected to come in at $5.76 per Trefis analysis, 11 cents above the consensus estimate. In Q4 2021, the company’s adjusted earnings per share (EPS) rose 60% y-o-y to $5.58, thanks to the restaurant chain’s strong revenue growth, and higher restaurant-level margins of 23% (compared to 21% in 2019), and a lower-than-usual effective tax rate. It should be noted that rising beef, avocado, and freight costs resulted in Chipotle’s 8.6% operating margin coming in far below the previous three quarters.

(3) Stock price estimate much higher than the current market price

Going by our Chipotle Valuation, with an EPS estimate of around $36.71 and a P/E multiple of 52.6x in fiscal 2022, this translates into a price of $1930, which is almost 30% 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.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

Returns Apr 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 CMG Return -6% -15% 292%
 S&P 500 Return -3% -8% 96%
 Trefis Multi-Strategy Portfolio -7% -14% 239%

[1] Month-to-date and year-to-date as of 4/25/2022
[2] Cumulative total returns since the end of 2016

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