Chipotle Mexican Grill Inc. Reports Third-Quarter Results

Chipotle Mexican Grill Inc. is set to release its third-quarter results after the market closes on Thursday. Despite concerns about consumer spending, the fast-food chain may be outperforming its competitors, according to foot-traffic data from analytics company Placer.ai.

Beating the Competition with Innovation and Menu Enhancements

In a recent blog post, Bracha Arnold of Placer.ai states that both Chipotle and McDonald's are facing economic headwinds but are well-positioned to continue their winning streak. The key factors contributing to their success are their focus on innovation and menu enhancements in recent years, allowing them to effectively address industry challenges.

Positive Indicators for Healthy Demand

As evidence of strong demand and a potential future financial advantage, Chipotle recently implemented price increases of about 3% at its U.S. stores. Truist Securities analyst Jake Bartlett sees this move as a sign of confidence in robust traffic trends. It also reflects the expectation of continued operating cost inflation, particularly in labor and commodities, extending into 2024.

Key Figures to Watch

As investors await Chipotle's third-quarter report, here are the essential numbers to keep an eye on:

Earnings Expectations

• The FactSet consensus is for adjusted earnings of $10.55 per share in the fiscal third quarter, compared to $9.51 in the same period last year.

Revenue Projections

• Analysts tracked by FactSet predict that the restaurant chain will report third-quarter revenue of $2.47 billion, up from $2.22 billion in the corresponding period last year.
• Same-store sales are expected to show a 4.5% increase according to FactSet.

Stay tuned for more updates following Thursday's report.

Related: McDonald’s and Chipotle Set to Continue Dominance Amid Consumer-Spending Worries, Research Shows

Stock Movement

In the last quarter, Chipotle experienced a 9.8% decrease in its stock following the announcement of inflation affecting some of its popular menu items. However, the overall performance of Chipotle's stock in 2023 has been impressive, with a rise of 31.2%. This growth surpasses the S&P 500 index's gain of 8.3%.

Analyst Ratings

Among 35 analysts surveyed by FactSet, 25 have given Chipotle an overweight or buy rating, while 10 have assigned a hold rating.

Analyst Insights

Wedbush analyst Nick Setyan "We anticipate that the current Q4 expectations for same-store sales growth and margin will be exceeded. This prediction is based on the strong performance of Carne Asada compared to the underwhelming performance of Garlic Guajillo last year. Furthermore, with relatively favorable pricing compared to their peers in Q4, we wouldn't be surprised if there is an upside to current Q4 transaction growth estimates. Additionally, we anticipate that the price increase in Q4 could surpass expectations."

Bracha Arnold, Placer.ai "McDonald's and Chipotle's dominance in the fast food dining segment continues unabated. Both companies have successfully leveraged their respective strengths to appeal to different consumer bases. McDonald's stands out as an affordable rural dining destination, while Chipotle attracts suburban diners from higher income brackets. Given these advantages, both brands are well-positioned to maintain their dominance in their respective dining categories."

Lauren Silberman, Deutsche Bank "High-quality, US-based companies with a clean balance sheet and strong fundamentals present a scarcity value. Chipotle fits this description, and there is potential for upside in its numbers. We predict that third-quarter same-store sales will reach 4.75%, surpassing the sell-side's expectation of 4.5%. The buy-side expectations are even higher."