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 second-quarter results on Tuesday, July 26. We expect CMG’s stock to trade higher due to revenues and earnings beating expectations in its second-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 healthy sales and profitability growth in the first quarter as well, which is a big step in the right direction for the popular Tex-Mex chain. For Q2 2022, Chipotle is forecasting 10% to 12% growth in comparable restaurant sales assuming current sales trends continue. For the full year 2022, it counts on opening 235 to 250 new restaurants.
Our forecast indicates that Chipotle’s valuation is $1538 per share, which is 14% higher than the current market price. Look at our interactive dashboard analysis on Chipotle Earnings Preview: What To Expect in Fiscal Q2? for more details.
(1) Revenues expected to be slightly ahead of consensus estimates
Trefis estimates Chipotle’s Q2 2022 revenues to be around $2.3 Bil, 4% ahead of the consensus estimate. In Q1, Chipotle’s revenue grew 16% y-o-y to $2.0 billion, on the back of 9% growth in comparable restaurant sales (outlets in operation for 13 calendar months at a minimum). In-restaurant sales grew by 33% largely thanks to the return of onsite diners. To add to this, Chipotle has remarkable store economics. CMG’s average restaurant sales rose 13% year-over-year (y-o-y) to $2.6 million in Q1, despite adding 51 new restaurants over the same period – illustrating that the additions are not cannibalizing existing locations. Also, the company’s digital sales continue to be strong at almost 42% of the core food and beverage business in Q1, despite the return of in-person dining. For the full year of 2022, we forecast Chipotle’s Revenues to be $8.9 billion, up 17% y-o-y.
2) EPS is also likely to be slightly ahead of consensus estimates
Chipotle’s Q2 2022 earnings per share (EPS) is expected to come in at $5.76 per Trefis analysis, 11 cents above the consensus estimate. The company raised its menu prices by 4% in Q1 to push the inflationary cost onto customers, which was on top of another price hike realized in December 2021. This ability to raise menu prices somewhat mitigated the rise in input costs of beef, paper, and avocado during the first quarter. As a result, Chipotle’s restaurant-level operating margin shrank only 160 basis points to 20.7% in Q1, which could have been worse. Overall, the company’s earnings per share rose 25% y-o-y to $5.64 in Q1. It should be noted that Chipotle’s highest-margin sales are digital orders, so momentum on this front serves the business well for continued profit growth in the long run.
(3) Stock price estimate higher than the current market price
Going by our Chipotle Valuation, with an EPS estimate of around $32.02 and a P/E multiple of 48.0x in fiscal 2022, this translates into a price of $1538, which is almost 14% higher than the current market price. That said, the company’s stock appears cheap at the current 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.
With inflation rising and the Fed raising interest rates, Chipotle has fallen 23% this year. Can it drop more? See how low can CMG stock go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.
|S&P 500 Return||5%||-17%||77%|
|Trefis Multi-Strategy Portfolio||10%||-16%||235%|
 Month-to-date and year-to-date as of 7/25/2022
 Cumulative total returns since the end of 2016