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Factors That Underscore Chipotle's (CMG) Solid Prospects
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Chipotle Mexican Grill, Inc. (CMG - Free Report) is riding high on robust comparable sales growth, expansion efforts and sales-building initiatives. This, along with strength in digital sales, rise in menu prices and higher restaurant-level operating margin, has been driving the company’s performance. Shares of the company have gained 37.4% in the past six months compared with the industry’s rise of 7.1%.
This Zacks Rank #1 (Strong Buy) company has an impressive long-term earnings growth rate of 31.8%. In 2023, the company’s sales and earnings are likely to witness growth of 14% and 33.9% year over year, respectively.
Let us discuss the factors highlighting why investors should buy the stock for the time being.
Robust Comps Growth
Impressive comps performance continues to drive growth. During the first quarter, comparable restaurant sales increased 10.9% year over year, following growth of 5.6% (in fourth-quarter 2022), 7.6% (in third-quarter 2022), 10.1% (in second-quarter 2022) and 9% (in first-quarter 2022). The increase is primarily attributable to a rise in menu prices and higher transactions. Consistent strength in digital sales, solid recovery of in-restaurant sales and positive customer reception to new menu items contributed to the company’s results. For second-quarter and full-year 2023, the company expects comps growth in the range of mid-to-high-single digits.
Initiatives to Spur Growth
Chipotle is working on strengthening its brand and recovering sales by shifting its strategy from giveaways, discounts and rewards to new menu items, operational excellence, enhancement of guest experience, technology-driven convenience and more aggressive brand marketing. Additionally, CMG has been working on a new pipeline for its menu offerings. During the first quarter of 2023, the company announced the addition of Fajitas to its Quesadilla platform (as a permanent menu item) and reported a solid business with respect to the same. The addition was supported by the limited complexity in its restaurant operations. The company announced the global roll out of Chicken Al Pastor in the United States, Canada and Europe and reported solid customer feedback.
The introduction of new items, solid marketing activities that include a combination of brand-building efforts as well as transaction-driving promotions and advertising are likely to lead to steady inflow of new customers.
Image Source: Zacks Investment Research
Expansion Efforts
During the first quarter of 2023, CMG opened 41 new restaurants, with 34 locations, including a Chipotlane. The addition of Chipotlane enhanced customer access and convenience and bolstered new store restaurant sales, margins and returns. It continues to expand its digital drive with Chipotlane. The company has opened a digital-only kitchen as well. It expects to open 255-285 restaurants (2023), with at least 80% of the restaurants having Chipotlane.
Backed by impressive unit economics and success of small-town locations, the company anticipates operating more than 7,000 restaurants over the long term in North America. It remains optimistic with respect to expansion plans in Canada. During the first quarter of 2023, the company opened its first Chipotlane in Ontario. The company anticipates its annual unit growth rate in the range of 8-10%.
Other Key Picks
Here are some other top-ranked stocks from the Zacks Retail-Wholesale sector.
The Zacks Consensus Estimate for SHAK’s 2023 sales and EPS suggests growth of 21.4% and 148.4%, respectively, from the year-ago period’s reported levels.
Chuy's Holdings, Inc. (CHUY - Free Report) carries a Zacks Rank #2 (Buy) at present. CHUY has a trailing four-quarter earnings surprise of 23.4%, on average. Shares of the company have gained 30.2% in the year-to-date period.
The Zacks Consensus Estimate for CHUY’s 2023 sales and EPS suggests growth of 9.9% and 24.8%, respectively, from the year-ago period’s reported levels.
Arcos Dorados Holdings Inc. (ARCO - Free Report) currently has a Zacks Rank #2. ARCO has a long-term earnings growth rate of 9.5%. Shares of the company have gained 1.1% in the year-to-date period.
The Zacks Consensus Estimate for ARCO’s 2023 sales and EPS suggests growth of 13.4% and 4.4%, respectively, from the year-ago period’s reported levels.
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Factors That Underscore Chipotle's (CMG) Solid Prospects
Chipotle Mexican Grill, Inc. (CMG - Free Report) is riding high on robust comparable sales growth, expansion efforts and sales-building initiatives. This, along with strength in digital sales, rise in menu prices and higher restaurant-level operating margin, has been driving the company’s performance. Shares of the company have gained 37.4% in the past six months compared with the industry’s rise of 7.1%.
This Zacks Rank #1 (Strong Buy) company has an impressive long-term earnings growth rate of 31.8%. In 2023, the company’s sales and earnings are likely to witness growth of 14% and 33.9% year over year, respectively.
Let us discuss the factors highlighting why investors should buy the stock for the time being.
Robust Comps Growth
Impressive comps performance continues to drive growth. During the first quarter, comparable restaurant sales increased 10.9% year over year, following growth of 5.6% (in fourth-quarter 2022), 7.6% (in third-quarter 2022), 10.1% (in second-quarter 2022) and 9% (in first-quarter 2022). The increase is primarily attributable to a rise in menu prices and higher transactions. Consistent strength in digital sales, solid recovery of in-restaurant sales and positive customer reception to new menu items contributed to the company’s results. For second-quarter and full-year 2023, the company expects comps growth in the range of mid-to-high-single digits.
Initiatives to Spur Growth
Chipotle is working on strengthening its brand and recovering sales by shifting its strategy from giveaways, discounts and rewards to new menu items, operational excellence, enhancement of guest experience, technology-driven convenience and more aggressive brand marketing. Additionally, CMG has been working on a new pipeline for its menu offerings. During the first quarter of 2023, the company announced the addition of Fajitas to its Quesadilla platform (as a permanent menu item) and reported a solid business with respect to the same. The addition was supported by the limited complexity in its restaurant operations. The company announced the global roll out of Chicken Al Pastor in the United States, Canada and Europe and reported solid customer feedback.
The introduction of new items, solid marketing activities that include a combination of brand-building efforts as well as transaction-driving promotions and advertising are likely to lead to steady inflow of new customers.
Image Source: Zacks Investment Research
Expansion Efforts
During the first quarter of 2023, CMG opened 41 new restaurants, with 34 locations, including a Chipotlane. The addition of Chipotlane enhanced customer access and convenience and bolstered new store restaurant sales, margins and returns. It continues to expand its digital drive with Chipotlane. The company has opened a digital-only kitchen as well. It expects to open 255-285 restaurants (2023), with at least 80% of the restaurants having Chipotlane.
Backed by impressive unit economics and success of small-town locations, the company anticipates operating more than 7,000 restaurants over the long term in North America. It remains optimistic with respect to expansion plans in Canada. During the first quarter of 2023, the company opened its first Chipotlane in Ontario. The company anticipates its annual unit growth rate in the range of 8-10%.
Other Key Picks
Here are some other top-ranked stocks from the Zacks Retail-Wholesale sector.
Shake Shack Inc. (SHAK - Free Report) currently sports a Zacks Rank #1. Shares of the company have risen 65.6% in the year-to-date period. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for SHAK’s 2023 sales and EPS suggests growth of 21.4% and 148.4%, respectively, from the year-ago period’s reported levels.
Chuy's Holdings, Inc. (CHUY - Free Report) carries a Zacks Rank #2 (Buy) at present. CHUY has a trailing four-quarter earnings surprise of 23.4%, on average. Shares of the company have gained 30.2% in the year-to-date period.
The Zacks Consensus Estimate for CHUY’s 2023 sales and EPS suggests growth of 9.9% and 24.8%, respectively, from the year-ago period’s reported levels.
Arcos Dorados Holdings Inc. (ARCO - Free Report) currently has a Zacks Rank #2. ARCO has a long-term earnings growth rate of 9.5%. Shares of the company have gained 1.1% in the year-to-date period.
The Zacks Consensus Estimate for ARCO’s 2023 sales and EPS suggests growth of 13.4% and 4.4%, respectively, from the year-ago period’s reported levels.