We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Here's Why You Should Retain Chipotle (CMG) in Your Portfolio
Read MoreHide Full Article
Chipotle Mexican Grill, Inc. (CMG - Free Report) is likely to benefit from strong comp performance Chipotlane add-ons and digital initiatives. Also, the emphasis on marketing initiatives bodes well. However, elevated expenses are a concern.
Let us discuss the factors that highlight why investors should retain the stock for now.
Factors Driving Growth
CMG benefits from strong comps performance. During second-quarter 2024, comparable restaurant sales increased 11.1% year over year compared with 7% growth reported in the previous quarter. The upside can be attributed to higher transactions, increased average checks and new restaurant openings. This and consistent strength in digital sales contributed to the company’s performance. For 2024, the company anticipates comps growth in the mid to high-single-digit range, driven by its transaction growth and strong comps growth trends.
Chipotle is making significant strides in technology and innovation. The company stated that Initiatives, including dual-sided grills, automated digital makelines and Autocado, are undergoing final evaluations. The enhancements aim to streamline operations, improve consistency and elevate the guest experience. The company emphasizes the stage-gate process and the implementation of impactful innovations to drive growth.
Chipotle's marketing efforts continue to gain traction. Initiatives like the return of Chicken Al Pastor are driving incremental transactions and increased spending. It plans to bring back Smoke Brisket (a limited-time offering). Campaigns like National Burrito Day have contributed to increased sales and customer engagement. The brand’s visibility on global platforms, including partnerships with athletes in Paris and limited-time offerings like gold foil-wrapped burritos, pave a path for growth in the upcoming periods.
The company continues to focus on the addition of Chipotlanes to drive growth. During the second quarter, CMG opened 53 new restaurants, with 46 locations, including a Chipotlane. The addition of Chipotlane enhanced customer access and convenience and bolstered new store restaurant sales, margins and returns.
Image Source: Zacks Investment Research
Backed by the strong performance, the company remains on track to open 285-315 new restaurants in North America this year, with more than 80% of them including a Chipotlane. It plans to expand internationally, with new restaurants in Kuwait and Dubai in partnership with the Alshaya Group.
Year to date, the company’s shares have increased 16.8% against the industry’s 0.8% fall.
Concerns
CMG has been facing inflation across most commodities and categories. During the second quarter, food, beverage and packaging costs were $873.7 million compared with $738.7 million reported in the prior-year quarter. During the quarter, the company stated that benefits from menu price increases (implemented last year) were partly negated by rising avocado costs, increased oil usage and high demand for beef (resulting from the Braised Beef Barbacoa marketing initiative). The labor costs increased 17.2% year over year to $716.6 million.
For third-quarter 2024, the company anticipates the cost of sales to be approximately 31%. For the quarter, the company anticipates its labor expenses to remain around the low-25% range. For 2024, the cost of sales is expected to be in the low to mid-single-digit range.
Zacks Rank & Key Picks
Chipotle currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Zacks Retail-Wholesale sector include:
The Zacks Consensus Estimate for TXRH’s 2024 sales and earnings per share (EPS) indicates 15.6% and 39.2% growth, respectively, from the year-earlier actuals.
Wingstop Inc. (WING - Free Report) carries a Zacks Rank #2 (Buy). It has a trailing four-quarter negative earnings surprise of 21.8%, on average. The stock has surged 133.7% in the past year.
The Zacks Consensus Estimate for WING’s 2024 sales and EPS suggests a rise of 36% and 51.2%, respectively, from the year-ago levels.
El Pollo Loco Holdings, Inc. (LOCO - Free Report) carries a Zacks Rank #2. It has a trailing four-quarter earnings surprise of 21.6%, on average. LOCO’s shares have risen 38.8% in the past year.
The Zacks Consensus Estimate for LOCO’s 2025 sales and EPS indicates 3.8% and 11.7% growth, respectively, from the prior-year figures.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Here's Why You Should Retain Chipotle (CMG) in Your Portfolio
Chipotle Mexican Grill, Inc. (CMG - Free Report) is likely to benefit from strong comp performance Chipotlane add-ons and digital initiatives. Also, the emphasis on marketing initiatives bodes well. However, elevated expenses are a concern.
Let us discuss the factors that highlight why investors should retain the stock for now.
Factors Driving Growth
CMG benefits from strong comps performance. During second-quarter 2024, comparable restaurant sales increased 11.1% year over year compared with 7% growth reported in the previous quarter. The upside can be attributed to higher transactions, increased average checks and new restaurant openings. This and consistent strength in digital sales contributed to the company’s performance. For 2024, the company anticipates comps growth in the mid to high-single-digit range, driven by its transaction growth and strong comps growth trends.
Chipotle is making significant strides in technology and innovation. The company stated that Initiatives, including dual-sided grills, automated digital makelines and Autocado, are undergoing final evaluations. The enhancements aim to streamline operations, improve consistency and elevate the guest experience. The company emphasizes the stage-gate process and the implementation of impactful innovations to drive growth.
Chipotle's marketing efforts continue to gain traction. Initiatives like the return of Chicken Al Pastor are driving incremental transactions and increased spending. It plans to bring back Smoke Brisket (a limited-time offering). Campaigns like National Burrito Day have contributed to increased sales and customer engagement. The brand’s visibility on global platforms, including partnerships with athletes in Paris and limited-time offerings like gold foil-wrapped burritos, pave a path for growth in the upcoming periods.
The company continues to focus on the addition of Chipotlanes to drive growth. During the second quarter, CMG opened 53 new restaurants, with 46 locations, including a Chipotlane. The addition of Chipotlane enhanced customer access and convenience and bolstered new store restaurant sales, margins and returns.
Image Source: Zacks Investment Research
Backed by the strong performance, the company remains on track to open 285-315 new restaurants in North America this year, with more than 80% of them including a Chipotlane. It plans to expand internationally, with new restaurants in Kuwait and Dubai in partnership with the Alshaya Group.
Year to date, the company’s shares have increased 16.8% against the industry’s 0.8% fall.
Concerns
CMG has been facing inflation across most commodities and categories. During the second quarter, food, beverage and packaging costs were $873.7 million compared with $738.7 million reported in the prior-year quarter. During the quarter, the company stated that benefits from menu price increases (implemented last year) were partly negated by rising avocado costs, increased oil usage and high demand for beef (resulting from the Braised Beef Barbacoa marketing initiative). The labor costs increased 17.2% year over year to $716.6 million.
For third-quarter 2024, the company anticipates the cost of sales to be approximately 31%. For the quarter, the company anticipates its labor expenses to remain around the low-25% range. For 2024, the cost of sales is expected to be in the low to mid-single-digit range.
Zacks Rank & Key Picks
Chipotle currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Zacks Retail-Wholesale sector include:
Texas Roadhouse, Inc. (TXRH - Free Report) sports a Zacks Rank #1 (Strong Buy). It has a trailing four-quarter earnings surprise of 0.4%, on average. TXRH’s shares have surged 60.3% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for TXRH’s 2024 sales and earnings per share (EPS) indicates 15.6% and 39.2% growth, respectively, from the year-earlier actuals.
Wingstop Inc. (WING - Free Report) carries a Zacks Rank #2 (Buy). It has a trailing four-quarter negative earnings surprise of 21.8%, on average. The stock has surged 133.7% in the past year.
The Zacks Consensus Estimate for WING’s 2024 sales and EPS suggests a rise of 36% and 51.2%, respectively, from the year-ago levels.
El Pollo Loco Holdings, Inc. (LOCO - Free Report) carries a Zacks Rank #2. It has a trailing four-quarter earnings surprise of 21.6%, on average. LOCO’s shares have risen 38.8% in the past year.
The Zacks Consensus Estimate for LOCO’s 2025 sales and EPS indicates 3.8% and 11.7% growth, respectively, from the prior-year figures.