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Buy Soaring Chipotle (CMG) Stock Ahead of Q4 Earnings Wednesday?

Benjamin Rains

Shares of Chipotle CMG have soared over 70% in the last 12 months on the back of solid sales and a chief executive change. Now the question for investors and Wall Street is will Chipotle’s run of success continue, or will it slide back down?

We need to take a look at what to expect from the fast-casual firm’s upcoming fourth-quarter financial results to see.

Overview

Chipotle owned and operated all of its 2,450 restaurants as of the end of the third quarter, across the U.S., Canada, the UK, France, and Germany. The firm rose to prominence for its simplicity and healthy ingredients and helped spark the larger fast-casual movement that includes Shake Shack SHAK.

Chipotle hired its new CEO Brian Niccol last spring. Niccol took over after Chipotle suffered nearly two years of weak sales, spurred in part by multiple food-safety concerns. Since his arrival from Yum Brands’ YUM Taco Bell, he has focused on digital ordering and delivery, simmilar to industry giants like Starbucks SBUX and McDonald’s MCD and retailers Walmart WMT and Target TGT.

For the first nine months of fiscal 2018, Chipotle saw its revenues jump 8.1% from the year-ago period to hit $3.6 billion. Meanwhile, the firm’s comparable sales popped 3.3%. Plus, CMG’s digital sales surged over 34% to help account for roughly 10% of total sales.

As we mentioned at the top, shares of Chipotle have soared roughly 74% over the last year, which crushed its industry’s 1.7% average climb and the S&P 500’s similar expansion. Despite this surge, shares of CMG are still down slightly over the last five years. But investors will also notice how impressive Chipotle stock was for a roughly six-year stretch.

Q4 Outlook & Earnings Trends

Moving on, Chipotle’s Q4 revenues are projected to jump 7.47% to reach $1.19 billion, based on our current Zacks Consensus Estimate. This would fall below Q3’s 8.6% top-line growth.

Along with overall revenue growth, our NFM estimate calls for the company’s comp sales to pop 4.43%, which would come in slightly higher than last quarter’s 4.4% same-store sales growth and outpace Q2’s 3.3% and Q1’s 2.2%. Strength in this vital retail metric could help CMG stock continue its recent surge as it shows customers are coming back to established stores.

At the bottom end of the income statement, CMG’s adjusted quarterly earnings are projected to pop 2.24% to touch $1.37 per share. On top of that, the firm’s full-year earnings are expected to climb over 29%. Peeking ahead to fiscal 2019, the company’s adjusted EPS figure is projected to surge roughly 41% above our 2018 estimate, which should be an encouraging sign for investors.

We should also point out that Chipotle’s earnings estimate revisions activity has leaned far more heavily to the positive side over the last 30 days, with all revisions in the last seven days coming in higher. This means that at least some analysts are more bullish on CMG’s earnings outlook than they were not too long ago.

 

Bottom Line

Chipotle is currently a Zacks Rank #3 (Hold) that sports “A” grades for both Growth and Momentum in our Style Scores system. With that said, Chipotle stock sits near its 52-week high and it seems that many U.S. funds are waiting for its official Q4 results to determine if they want to buy more shares.

Chipotle is scheduled to release its fourth-quarter financial results after the closing bell on Wednesday, February 6. Make sure to come back to Zacks for a complete post-earnings breakdown.

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