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Category: Stock Market and Chipotle
Date: 23 October 2019 Stock Price: $831.07 We take a look at the 3rd quarter earnings report of their 2019 fiscal year of Chipotle, the mexican grill food franchise group with over 2500 restaurants across the globe.
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About Chipotle
Chipotle Mexican Grill, Inc. (NYSE: CMG) is cultivating a better world by serving responsibly sourced, classically-cooked, real food with wholesome ingredients without artificial colors, flavors or preservatives. Chipotle had approximately 2,500 restaurants as of June 30, 2019, in the United States, Canada, the United Kingdom, France and Germany and is the only restaurant company of its size that owns and operates all its restaurants. With more than 80,000 employees passionate about providing a great guest experience, Chipotle is a longtime leader and innovator in the food industry. Chipotle is committed to making its food more accessible to everyone while continuing to be a brand with a demonstrated purpose as it leads the way in digital, technology and sustainable business practices. Steve Ells, founder and executive chairman, first opened Chipotle with a single restaurant in Denver, Colorado in 1993.
Financial overview of Chipotle's 3rd quarter 2019 earnings report
The data below refers to the numbers of the latest quarter (unless specified otherwise)
- Revenue: $1.403 billion (up from $1.225 billion for the same quarter of the previous year)
- Revenue increased by 14.5% over the last 12 months
- Total operating expenses: $1.288 billion (up from $1.167 billion for the same quarter of the previous year)
- Total operating expenses increased by 10.37% over the last 12 months
- Net income: $98.582 million (up from $38.204 million for the same quarter of the previous year)
- Diluted earnings per share: $3.47 (up from $1.36 for the same quarter of the previous year)
- Weighted average shares outstanding-diluted: 28.388 million (up from 28.017 million for the same quarter of the previous year)
- Cash and equivalents: $386.565 million
- Cash and cash equivalents per share: $13.61
- Cash and cash equivalents makes up 7.82% of the Chipotle's total assets
- Cash and cash equivalents makes up 1.63% of Chipotle's current market capital
- Accounts and notes receivable: $49.489 million
- Accounts and notes receivable makes up 1% of the group's total assets
- Stockholders equity: $1.622 billion
- Stockholders equity per share: $57.13
- Cash generated from operations (for the 9 months): $535.043 million
- Cash generated from operations per share (for the 9 months): $18.84
Chipotle's management commentary on their 3rd quarter results and earnings guidance
NEWPORT BEACH, Calif., Oct. 22, 2019 /PRNEWSWIRE/ -- Chipotle Mexican Grill, Inc. (NYSE: CMG) today reported financial results for its third quarter ended September 30, 2019. "We're pleased with our overall results in the quarter, which reflects further progress on our key strategic initiatives to provide a great guest experience and position Chipotle to deliver above industry growth for many years to come," said Brian Niccol, Chief Executive Officer. "These strong results reinforce that running great restaurants with a purpose of cultivating a better world is a compelling proposition."
Third quarter highlights, year over year:
"We're pleased with our financial performance, which marks the sixth consecutive quarter of accelerating comps and reflects continued progress on our key strategic initiatives," said Brian Niccol, Chief Executive Officer. "These strong results were delivered despite a tougher year over year comparison and benefited from better restaurant operations, more effective marketing, and leveraging our digital make line to grow sales and expand access."
Outlook
For 2019, management is anticipating the following:
For 2020, management is anticipating the following:
Third quarter highlights, year over year:
- Revenue increased 14.6% to $1.4 billion
- Comparable restaurant sales increased 11.0%, net of 10 bps from loyalty deferral, and included nearly 7.5% of comparable restaurant transactions growth
- Digital sales grew 87.9% and accounted for 18.3% of sales for the quarter
- Restaurant level operating margin was 20.8%, an increase of 210 basis points
- Diluted earnings per share was $3.47, net of a $0.35 after-tax impact from expenses related to restaurant asset impairment, corporate restructuring, and certain other costs, a 155.1% increase from $1.36. Adjusted diluted earnings per share excluding these charges was $3.82, a 76.9% increase from $2.16.1
- Opened 25 new restaurants including one relocation, and closed one restaurant
"We're pleased with our financial performance, which marks the sixth consecutive quarter of accelerating comps and reflects continued progress on our key strategic initiatives," said Brian Niccol, Chief Executive Officer. "These strong results were delivered despite a tougher year over year comparison and benefited from better restaurant operations, more effective marketing, and leveraging our digital make line to grow sales and expand access."
Outlook
For 2019, management is anticipating the following:
- Being at the top end of our prior high single digit comparable restaurant sales growth guidance
- Being at or slightly below our prior guidance of 140 to 155 new restaurant openings
- An estimated underlying effective Q4 tax rate in the range of 26% to 29%, before the impact of any stock option exercises
For 2020, management is anticipating the following:
- 150 to 165 new restaurant openings
Chipotle (NYSE: CMG) stock price history
The image below, obtaine from Google, shows the stock price history of Chipotle Mexican Grill (NYSE: CMG) over the last 5 years. And its been a seesaw affair for the group's stock, with it being hit with significant declines since late 2015 and hitting its lows at the start of 2018 with the stock trading around $271 in early 2018. Since them the group's stock has surged all the way to over $831 a stock. Since its lows in 2018 to its current price the stock price has increased by 205% in less than two years. That just shows how strong the recent upsurge in the price of Chipotle Mexican Grill stock has been. The question is whether the group's stock offers value at its current price considering its strong run in the last two years? Is there value in the stock based on their latest earnings reports? 5 years ago Chipotle was trading at $615 a stock and its currently trading at $831. So over the last 5 years the stock has returned % to Chipotle stockholders.
The stock of Chipotle is trading at a lot closer to its 52 week high of $857.90 than it is to its 52 week low of $383.20, which to us is a clear indication that the short term sentiment and momentum of Chipotle's stock is very positive.
The stock of Chipotle is trading at a lot closer to its 52 week high of $857.90 than it is to its 52 week low of $383.20, which to us is a clear indication that the short term sentiment and momentum of Chipotle's stock is very positive.
Recent coverage of Chipotle
The extract regarding Chipotle below is as obtained from TheStreet.com
Shares of Chipotle Mexican Grill Inc. (CMG - Get Report) were active in after-hour trading Tuesday after it beat analysts' expectations for revenue, same-store sales and adjusted earnings per share in the third quarter. Revenue increased 15% to $1.4 billion, compared with a Bloomberg-compiled forecast of $1.38 billion. Same-store sales gained 11%, compared to forecasts of a 9.3% increase, Yahoo reported. The comparable-restaurant sales growth stemmed from a 7.5% increase in comparable restaurant transactions and a 3.5% increase in the average check size, the company said. Chipotle boosted menu prices last year. Adjusted earnings per share totaled $3.82 in the third quarter, compared to the $3.21 projection compiled by Bloomberg, and up from $2.16 a year earlier.
Read the full article here
Shares of Chipotle Mexican Grill Inc. (CMG - Get Report) were active in after-hour trading Tuesday after it beat analysts' expectations for revenue, same-store sales and adjusted earnings per share in the third quarter. Revenue increased 15% to $1.4 billion, compared with a Bloomberg-compiled forecast of $1.38 billion. Same-store sales gained 11%, compared to forecasts of a 9.3% increase, Yahoo reported. The comparable-restaurant sales growth stemmed from a 7.5% increase in comparable restaurant transactions and a 3.5% increase in the average check size, the company said. Chipotle boosted menu prices last year. Adjusted earnings per share totaled $3.82 in the third quarter, compared to the $3.21 projection compiled by Bloomberg, and up from $2.16 a year earlier.
Read the full article here
Chipotle (NYSE: CMG) latest stock valuation
So based on their latest earnings report what do value Chipotle Mexican Grill shares at? And is there value in the stock considering the strong run the stock price had over the last two years? Based on the earnings report and guidance provided our valuation model provides a target (full value) price for Chipotle at $427 a stock (up from our 2nd quarter 2019 earnings valuation of Chipotle).
We therefore believe the stock's strong run so far in 2019 has been overdone and we would not recommend long term fundamental investors invest in the stock at its current price. We usually recommend long term fundamental and value investors look to enter a stock at least 10% below our target (full value) price, which in this case is $427. We therefore believe a good entry point into Chipotle stock is at $384.30 or below. Since the stock is far above our target (full value) price we do not recommend Chipotle as a buy at its current price.
We therefore believe the stock's strong run so far in 2019 has been overdone and we would not recommend long term fundamental investors invest in the stock at its current price. We usually recommend long term fundamental and value investors look to enter a stock at least 10% below our target (full value) price, which in this case is $427. We therefore believe a good entry point into Chipotle stock is at $384.30 or below. Since the stock is far above our target (full value) price we do not recommend Chipotle as a buy at its current price.
Chipotle next earnings release
Chipotle is expected to release their 4th quarter and full fiscal 2019 results towards the end of January 2020