By Senad Karaahmetovic
Chipotle Mexican Grill (NYSE:CMG) reported better-than-expected Q3 EPS yesterday, in addition to better-than-expected guidance for this quarter. Shares are down just over 1% in pre-market trading.
CMG reported an EPS of $9.51 on revenue of $2.2 billion, which compares to the consensus of EPS of $9.17 on revenue of $2.23 billion. Revenue soared 13.7% YoY, driven by a 7.6% increase in comparable restaurant sales.
"Our performance in the third quarter confirms our brand and value proposition remain strong, even during a challenging economic environment. With consumer discretionary spending tightening, we are focused on running great restaurants and delivering excellent customer and employee experiences," said Brian Niccol, Chairman and CEO of Chipotle.
For this quarter, Chipotle said it expects its comparable restaurant sales growth to come in the mid to high-single digits. The company expects to open between 235 and 250 new restaurants in 2022, as well as between 255 and 285 openings in 2023.
“The benefit of menu price increases were partially offset by inflation across the menu primarily due to higher costs for dairy, packaging, tortillas and avocados,” Niccol added.
Truist analysts expect menu pricing to drive margins and offset near-term traffic pressure. The analysts raised the price target to $1,825 from $1,760 per share.
“4Q22 SSS guidance implies an acceleration from current levels (+M-to-HSD vs. +MSD in Oct.), but the primary driver appears meaningful (LTO for all of 4Q22 vs. half last year) and CMG's core customer appears strong. 4Q22 margin guidance was much stronger than expected, driven by significant menu pricing (~15% including the delivery premium) easing commodity inflation and less labor needed due to negative traffic. We continue to expect unit growth acceleration in '22 and '23, despite NT pressures,” the analysts said.
UBS analysts reiterated a Buy rating and a $1,900 per share price target on CMG as the Q4 guide came in better than expected.
“We still see CMG as positioned for above avg resiliency in a tough macro, w/ unit growth to accelerate to the upper end of 8-10%, and shares as attractive for among the highest quality growth in restaurants (~20%+ EPS CAGR),” they wrote in a note.