NEW YORK (AP) -- Chipotle's stock climbed 5 percent in premarket trading Friday after topping Wall Street expectations for the second quarter and posting strong comparable store sales.
Analyst Lynne Collier of Sterne, Agee & Leach pointed to strategic decisions made by the Mexican restaurant chain to support future growth. Some industry watchers had trimmed expectations, essentially because Chipotle had grown so fast that they felt it would be difficult to maintain that pace.
But after falling late last year, company shares crossed $300 in January and have been climbing ever since. Shares are up 27 percent year-to-date and hit a 52-week-high last week.
Sales at stores open at least a year exceeded Collier's projections, with traffic at its restaurants bustling. She said that Chipotle's decision to hold off on price hikes may have disappointed some investors, but that it was a wise decision for the long term because "it provides more flexibility in the event of higher commodity costs in the future."
After the market closed Thursday, Chipotle reported quarterly profit of $87.9 million. Revenue spiked 18 percent to $816.8 million, which blew away analyst expectations for revenue of $803 million.
Revenue from restaurants open at least a year, a key indicator of a retailer's health, rose 3.4 percent.
Chipotle is a top pick at Sterne, Agee & Leach. Collier maintained the company's "Buy" rating and $429 price target.
Janney Capital Markets' Mark Kalinowski said that he was tipping his sombrero to Chipotle for a job well done during the quarter, which has been a rough one for the restaurant chain industry. Kalinowski downgraded McDonald's this week, saying that investors are too optimistic about U.S. sales.
Shares of Chipotle Mexican Grill Inc., based in Denver, rose $20.25 to hit $397 before the opening bell.
- Investment & Company Information