IB Net Payout Yields Model

Chipotle Q4'18 Earnings - Live Updates

After the close, Chipotle Mexican Grill (CMG) reported earnings that dazzled the market. Yet, the restaurant stock is still recovering from the health scare juicing comp sales for a highly expensive stock
Q4'18 earnings details:
  • EPS of $1.72 beat by $0.32
  • Revenue of $1.23B, up 10.8% beats by $40 million
  • Comp sales 6.1% versus 4.5% forecast
  • Restaurant-level operating margin rose 210 bps to 17.0% of sales during the quarter.
Full Year 2019 Outlook
For 2019, management is anticipating the following:
  • Mid-single digit range comparable restaurant sales growth
  • 140 to 155 new restaurant openings
  • An estimated effective full year tax rate between 27.0% and 30.0%
One of the biggest take aways is the confusion on EPS estimates. The company actually earned $1.55 last year so hitting $1.72 this year is only a small gain from Q4'17. Adjusted net income only rose $4.3 million over 2017 levels.

A big disconnect had to exist with the restructuring charges as analysts shouldn't have forecasted an EPS dip on the forecast of a 4.5% comp sales gains.

The bottom line is that this doesn't alter the thesis that Chipotle returns to a $10-12 EPS based on normalized results while the stock trades for $568 in AHs trading now. Not a stock one should want to own when earnings really aren't growing that fast.

Update 4:20 est
Digital sales skyrocketed 66% during the quarter and accounted for 12.9% of all sales in part due to delivery promotions. The market is looking at this move as bullish, but the reality is that Chipotle juiced comp sales from digital sales that didn't contribute to income growth.

The average AUV is still at $2.0 million, down from $2.5 million at the peak. A lot of the comp sales gains are just a slow recapture of the lost sales and nothing to celebrate with a rich stock valuation.

Disclosure: No position mentioned. Please review the disclaimer page for more details. 


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