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Chipotle and O’Reilly Still Winning Stock Buys

Two stocks with continued upside potential -- just have patience


I want to take a moment to get you up to speed on Chipotle (NYSE:CMG), which consolidated a bit this week after a few analysts made some negative comments about the company’s second-quarter sales outlook.

I am reiterating my buy recommendation for CMG for several reasons.

First, in the Restaurant industry, there is really no place like Chipotle. Known for its fresh guacamole, sour cream and cheese made from pasture-raised cows and organic meat, customers are happy to pay a premium for Chipotle’s menu. Whether for lunch or dinner, you’re going to have to wait in line if you walk into a Chipotle restaurant.

So even in the face of rising food costs and a number of minor lawsuits, Chipotle has been consistently growing sales and earnings over the past several quarters. For its upcoming earnings announcement, which is slated for July 19, analysts expect 24% sales growth and over 40% earnings growth.

Meanwhile, the rest of the Restaurant industry is headed towards just 34% earnings growth. So I’m not overly concerned about the rumblings of a few analysts and I still consider this Conservative stock a great buy.

Meanwhile shares of O’Reilly Automotive (NASDAQ:ORLY) gapped down this week on news that the auto parts chain has cut its second-quarter guidance. While it previously projected same-store sales to climb 3-5%, the company now forecasts 2% to 2.5% same-store sales growth. Second-quarter earnings are now forecast between $1.13 and $1.17 per share, which is below the $1.19 per share consensus estimate.

However, despite this disappointing news, the company is still headed for solid earnings growth and we’ll have a better look at the actual numbers when O’Reilly announces earnings on July 25.

For now, I reiterate my buy recommendation for ORLY. While this week’s consolidation is certainly painful, and I apologize to all of those who had to weather it, I firmly believe that we need to wait until the company’s earnings announcement to get a better feel for its growth prospects. Add shares of this Moderately Aggressive stock.

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