Chipotle Mexican Grill (NYSE:CMG) reports second-quarter earnings after the market closes today and investors should be ready for Chipotle stock to rocket. The Mexican food chain might not go stratospheric immediately but so far this year it has risen 17% after reporting fourth-quarter 2023 results and again after reporting first-quarter earnings.

Chipotle stock, though, lost nearly a quarter of its value over the past month. As the market rotated away from high-flying growth stocks into more stable dividend-paying investments, even the top-notch restaurant chain was affected.

That is excellent for long-term investors. Buying good companies when they go on sale is how you build up a portfolio of excellent stocks that will reward you in the future. Chipotle Mexican Grill should be viewed as a buy no matter which way the stock goes. Buying before or after earnings will serve you well.

Another Beat In the Making

Expect Chipotle Mexican Grill’s second-quarter results to be fire. Wall Street analysts forecast the restaurateur to post revenue of $2.9 billion, a 17% increase over the year-ago figure and 9% above Q1 results. They also estimate profits of 32 cents per share, a huge 28% leap over last year a 23% gain sequentially. 

The consensus price target is around $65 per share, which is a 24% gain from where it trades now. It would also bring Chipotle stock close to where it was trading before it pulled back.

There is good reason to believe Chipotle Mexican Grill will exceed those estimates. The restaurant operator routinely beats analyst forecasts and should do so again this quarter.

For the past two quarters, Chipotle’s results got a boost because of strong comparable store sales. Driven by higher prices to compensate for higher labor costs and increased foot traffic, comps rose 8.4% and 7% in the fourth and first quarters, respectively. 

Coming Back for More

According to location analytics firm Placer.ai, Chipotle experienced a 17% jump in foot traffic in the second quarter. No doubt the figure was pushed higher as Chipotle opened more locations during the period, and the Mexican restaurant is also seeing phenomenal growth in its loyalty program. At the end of the first quarter, it had more than 40 million members. 

Yet it was more than just new store openings as visits per location were nearly 10% higher. Both figures were well ahead of the fast-casual dining segment overall.

Expect Chipotle to say that its menu innovations were behind the gains, at least in part. Last quarter, the restaurant operator noted the return of its Chicken al Pastor dish was a massive hit with customers. When it was launched in March, Chipotle noted it had received “three times more requests” on social media for the dish than any other limited-time offer (LTO) in the company’s history.

While the strong performance in 2024 so far allowed Chipotle to raise its comps guidance for the full year, it noted the back half will face some headwinds including the ending of the chicken dish LTO and California raising its minimum wage in April to $20 per hour.

Driving Sales Higher

Chipotle has over 3,400 locations across the country and plans to open hundreds more this year. Most of them will come with Chipotlane drive-thru windows. It expects as many as 80% of the 285 to 315 new restaurants will feature the drive-thru lane. Digital sales have now reached 37% of total sales, making the drive-thru a key ingredient in Chipotle’s success.

Because of the long, sustained growth it is experiencing it can readily support all of these new stores and more.

While Chipotle stock trades at a premium of 39 times next year’s earnings, 7 times sales, and 54x free cash flow, a good argument can be made it is worth it. As the premier fast-casual food chain experiencing phenomenal growth, it should go well above the market averages.

The second quarter won’t see any slowdown in this juggernaut’s progression. That is why Chipotle stock should be at the top of your buy list.

On the date of publication, Rich Duprey did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.