Chipotle Mexican Grill missed fourth-quarter estimates for earnings, revenue and same-store sales late Tuesday as some consumers tightened spending. CMG stock tumbled within a buy zone Wednesday.
"Regarding the consumer, CMG continued to see some traffic reduction from the lower-income consumer, though encouragingly did note that it is still benefiting from an uptick in frequency among higher-income consumers," RBC Capital Markets analysts Christopher Carril wrote in a note to clients late Monday. The analyst has an outperform rating on CMG stock, but trimmed his price target by $50 to $1,850.
The restaurant chain went into earnings riding high expectations. Ahead of earnings, on Feb. 3, Oppenheimer analysts said Chipotle was "getting spicy again." The burrito chain generates underappreciated growth with its Chipotlane drive-through offering, the report said. Last year, Chipotle hiked prices to offset food and wage cost inflation.
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Chipotle Earnings Jump
Estimates: Analysts polled by FactSet expected Chipotle earnings to jump nearly 60% to $8.91 per share. Revenue was seen growing 14%, year over year, to $2.232 billion.
Same-store sales were seen growing 6.9%, the lowest more than eight quarters.
Results: Earnings popped almost 49%, to $8.29 a share. Revenue climbed 11.2%, to $2.18 billion. Comparable store sales rose 5.6%.
Outlook: In 2023, analysts now project Chipotle earnings of $42.23, up 28.8% from 2022.
Management did not provide a specific earnings guidance, but projected first-quarter comparable store sales in the "high single-digits," and "low double-digits" for the entire year. It also anticipated 255 to 285 new restaurant openings.
CMG Stock
Shares of Chipotle Mexican Grill dropped 4.3% to 1,648.93 Wednesday. CMG stock reversed 1.3% higher to 1,722.86 on the stock market Tuesday, trading within 2% of the high posted in September 2022.
CMG stock remains above a 1,638.43 double-bottom buy point cleared in early February, MarketSmith charts show. The buy range runs to 1,720.35.
The restaurant stock had a strong kickoff to 2023, including a nearly 19% gain in January. It wilted for much of 2022.
The relative strength line has been trending higher. CMG stock earns a Relative Strength Rating of 87, out of a best-possible 99. In other words, Chipotle stock has outperformed 87% of all stocks in IBD's database over the past year.
Chipotlanes, Food Inflation, Price Hikes
On Feb. 6, Bank of America analysts also called Chipotlanes an opportunity.
Amid inflation, Wall Street is watching potential traffic impact from elevated pricing to offset costs. On social media, Chipotle customers have moaned about price hikes and smaller portions.
