Chipotle: Why CMG Stock Was Sizzling After Earnings

by Robert Martin | July 22, 2014 8:15 am

Chipotle Mexican Grill (CMG[1]) turned heads after the bell yesterday when the beloved fast-casual restaurant chain released second-quarter earnings. CMG stock exploded and was up more than 10% higher in Tuesday premarket trading, riding on the back of some solid stats for the last three-month period.

In fact, Chipotle stock was sitting right below $650 per share at the time of this writing — a new high. For comparison’s sake, the highest closing CMG stock price set back in March was almost $40 lower than that figure.

Thanks to the after-hours jump, Chipotle shares have improved 36% since late April alone. That’s nearly six times the broader market’s gains over the same time period.

For the cherry — or, I guess guacamole — on top, that new pricetag also represents a nearly 60% increase from the stock’s price 12 months ago, should it hold after today’s opening bell.

Earnings Propel CMG Stock

What exactly was in the Chipotle earnings report that had investors forming a line out the door to snag shares? Well, it’s pretty simple: a monster beat on both the top and bottom lines. The cold, hard numbers from Q2:

• Sales tallied $1.05 billion for the quarter, easily topping estimates of $990 million.
• Chipotle’s earnings came to $3.50 per share, handily beating Wall Street’s predictions of $3.08.
• Same-store sales also were strong, increasing more than 17% year-over-year.
• Chipotle also added 45 new locations, bringing the total count to 1,681.

Context also makes that performance a bit more mouth-watering. Namely, investors previously had to swallow two bottom-line misses over the past three earnings reports, and one that slid right in at analyst estimates.

No wonder CMG stock investors found these results so appealing.

Another important piece of context: Many experts have been worrying for some time that rising Chipotle prices could weigh on customer interest and, in turn, CMG stock. Clearly, though, Chipotle handled the increases just fine … likely thanks to the unwavering loyalty of its fans.

And one last consequence of Chipotle’s second-quarter numbers? A host of punny headlines and sentences about Chipotle’s earnings beat (yes, we’re guilty, too). Here’s a quick sampler from around the web:

• Chipotle stock soars after yummy earnings (CNN Money)
• Holy Burrito! Chipotle Crushes Earnings, Stock Soars To New High (Forbes)
• Chipotle Mexican Grill: Spicy Earnings Give After-Market Lift (Barron’s)

For the record, though, the puns did start before the earnings beat … again for those keeping track at home, here’s the headline from Seeking Alpha: Chipotle Poised For Well-Grilled Second-Quarter Earnings.

But hey, lettuce have our puns … as long as CMG stock investors are still satisfied.

As of this writing, Robert Martin did not hold a position in any of the aforementioned securities.

Source URL: https://investorplace.com/2014/07/cmg-stock-chipotle-earnings/

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