Chipotle’s Quarterly Earnings Beat Analysts’ Expectations, CMG Goes Up but Starts Falling

On Feb 5, 2020 at 3:23 pm UTC by Christopher Hamman · 3 min read
Chipotle’s Quarterly Earnings Beat Analysts’ Expectations, CMG Goes Up but Starts Falling
Photo: Mr. Blue MauMau / Flickr

Chipotle’s quarterly earnings have emerged stronger than the expectations of many on Wall Street. Will the company be able to show excellent performance this year?

Chipotle’s quarterly earnings have excited investors. Tuesday’s trading was quite a day for the stock. Chipotle Mexican Grill (CMG) stock went up to $890.17 which is a 1% increase. However, now the price has decreased to around $856.

This occurred before its earnings release which has proven to be positive. Adjusted earnings per share stood at $2.86. This was higher than the expected $2.75. Revenues hit the expected mark of $1.4 billion. The same-store sales increased to 13.4% beating the 9.5% expected rate.

The net income for this quarter stood at $72.4 million. This brings the income earnings to $2.86 per share. This is higher than the $2.75 expected earnings. Net sales rose to $1.4 billion. This is a 17.6% increase indicating a bullish trend. Digital sales grew by 78.3%. This shows a shift in the chain’s business model. 

Electronic orders seem to be one driving force behind Chipotle’s profits. The company will add between 150 to 165 new restaurants. About half of these new additions will have a drive-through for digital-only orders. 66 of them were active by the end of last year.

Chipotle’s Quarterly Earnings Show a Strong Business Model

At the core of Chipotle’s profitable quarter is from its Carne Asada protein. The company offered it as a more expensive protein alternative to clients. This was for a limited time. It also expects to run out of supplies before the end of the quarter. Reportedly, CEO Brian Nichol said that the company was considering adding it to the menu. This is dependent on the assurance of high-quality supplies of the protein. Replacements of the menu items are also to be expected. The current Queso Blanco is one such example. 

The 13.4% increase in same-store growth in revenue indicates customer loyalty. This is also consistent with the 5.4% average check.

As for its 2020 outlook, the company indicated several things. Mid-single digit same-store sales growth indicates a slightly expected slowdown. The 150 to 165 new restaurant openings show a strong drive in new markets. The effective tax rate of between 26%-29% indicates regulatory pressure on the business model. Although the pressure remains undefined, the business is expected to grow at margins below the above numbers this year.

The company also indicated that it had about $25 million in reserve. This reserve might be used to pay a settlement. This settlement has to do with the current U.S. attorney’s investigation into the illness outbreaks that occurred about four years ago.

The company indicated in its earnings release:

“While there can be no assurance that a settlement will be reached, we have been cooperating with the investigation and are in discussions to resolve this matter.”

Chipotle has been one of the fast-rising food brands gaining ground in the United States. Latin American food has become popular across the board. If the numbers are anything to go by, Chipotle’s business model will serve as an example of a hybrid business that is coping with increasing reliance on electronic commerce as a means of revenue generation. 

Business, Markets, News, Stocks, Wall Street
Christopher Hamman
Author: Christopher Hamman

Christopher Haruna Hamman is a Freelance content developer, Crypto-Enthusiast and tech-savvy individual. He is also a Superstar Content Developer, Strategy Demigod, and Standup Guy.

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