Chipotle (CMG) Earnings Top Forecasts, Stock Down on Food Costs, Outlook
Shares of Chipotle Mexican Grill Inc. (CMG) were down -33.03 or -5.06 percent to $620.00 per share in premarket trading this morning after the company announced better than expected third quarter earnings after the market close yesterday. Chipotle shares closed at $653.03, up +11.31 or +1.76 percent in Monday's regular trading session.
Chipotle reported third quarter net income of $130.8 million or $4.15 per diluted share, up from $83.4 million or $2.66 in the same period one year ago. Revenue rose +31.1 percent to $1.08 billion versus $827 million in 2013's third quarter. Analysts expected the company to report earnings of $3.84 per share on revenue of $1.06 billion.
Chipotle opened 43 new restaurants in the quarter and forecast it would open 190 to 205 in 2015. The company said that it would open 180 to 195 new stores this year in their last quarterly earnings report. Chipotle stated that the report included a full month of higher menu prices.
Founder and Chief Executive, Steve Ells told analysts after the earnings release that, "While our performance has been particularly strong this year, our results have been solid throughout our history as a public company even through the depths of the recession and I am often asked how we continue to perform so well. The fact is there is no great mystery to it. Our ability to generate such strong sales growth is the result of our commitment to serving the best tasting food we can. Food that is made with ingredients from more sustainable sources and prepared using classic cooking techniques, and our commitment to having teams of top performers in our restaurants who are empowered to provide an extraordinary customer experience.
Comparable restaurant sales increased an impressive +19.8 percent in the quarter. Nevertheless, the company forecast comparable store sales growth in the mid teens for the rest of the year and in the low to mid single digits in 2015 as Chipotle begins to hike prices.
Restaurant level operating margin increased 2 percent from a year ago to 28.8% in the quarter driven by positive sales leverage. Food costs were higher in the quarter, making up 34.3 percent of revenue, a rise of +0.7 percent. The increase was due to higher beef, dairy and avocado prices.
Chipotle stock is selling off in this morning's premarket, indicating investor's disappointment at the comparable store sales outlook for next year and higher food costs. The stock is still up +24 percent from this year's low and more than 20 percent for the year. Chipotle continues to be one of the best performing publicly traded restaurant stocks.
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