Chipotle Mexican Grill, Inc. (CMG) is beating the wider market this year, if only by a few points.
CMG stock, as of mid-Monday, was up 4% in 2015; nothing to write home about, but still far better than the 1% loss the S&P has endured.
The Denver, Colorado-based food chain — which believes in locally sourced, high-quality, non-GMO meat — has played a central role of revolutionizing the way Americans eat in recent years.
But can CMG stock play a revolutionary role in jump-starting your portfolio?
Let’s take a look at what analysts are calling for:
Chipotle Earnings
If the past is any indication, CMG will have a tough time disappointing the Wall Street analysts today. Simply put, Chipotle has beaten analysts’ earnings per share estimates for five consecutive quarters.
That bodes well for CMG stock in the near future. The company will announce its third quarter 2015 financial results Tuesday, Oct. 20, after the closing bell.
Here’s what analysts are expecting from CMG stock for the third quarter ended in September:
- Chipotle earnings per share: $4.63, +11.6% from $4.15 in Q3 2014.
- CMG revenue: $1.22 billion, +12.2% from $1.08 billion in Q3 2014.
CMG stock holders would certainly like to see both of these metrics rise by leaps and bounds, but increasing competition in the fast-casual industry is rather fierce. From Panera (PNRA) to Cracker Barrel (CBRL) to El Pollo Loco (LOCO) to Shake Shack (SHAK) and countless others, quick-service restaurants are popping up everywhere.
Holy Mother of Metrics!
Competition is always a challenge in the restaurant industry, and in the past CMG’s been able to take its rivals on head to head — and usually come out the victor. But CMG stock faces a different foe this quarter: Chipotle itself.
Even if revenue doesn’t quite live up to expectations, EPS growth may be enough to send shares higher. However, if CMG misses on both revenue and same-store sales (SSS) numbers … well, EPS growth essentially becomes meaningless.
As you can clearly see in the chart below, Chipotle’s SSS growth has been slumping pretty notably for the last three quarters now (chart courtesy of CNBC.com):
If that ugly trend continues to get worse, you could see a huge selloff in CMG stock on Wednesday. Part of that’s because falling same-store sales growth is never a good thing, but another risk with buying CMG stock before earnings tomorrow is the stock’s current sky-high valuation.
CMG stock, commanding a forward price-to-earnings multiple of 34, is about two times as expensive as the S&P 500 as a whole.
I love myself a good burrito as much as the next guy or gal, but you won’t find me buying Chipotle anytime soon — and certainly not the day before its next earnings announcement!
As of this writing, John Divine held no interests in any of the stocks mentioned. You can follow him on Twitter at@divinebizkid or email him at editor@investorplace.com.
