Last week, we spoke about what can happen to a company’s grade in Portfolio Grader if it reports disappointing earnings and sales results and investors lose interest. Today I want to share with you how positive earnings and sales can help a company’s grade.
So, let’s take a look at Chipotle Mexican Grill, Inc. (CMG).
While the company has shown steady growth in the last year, institutional investor attention waned in recent months. The stock’s Quantitative Grade, which signals institutional buying pressure, fluctuated between a B-rating and a D-rating.
In fact, last week, CMG held a D-rating for its Quantitative Grade and a C-rating for its Fundamental Grade. The Total Grade rang in at a D, making the stock a sell.
However, CMG’s Quantitative Grade was raised to a C-rating, bumping its Total Grade to a C-rating, following its second-quarter earnings results on July 26:
For the quarter, adjusted earnings increased 24.7% year-over-year to $9.30 per share, up from earnings of $7.46 per share in the same quarter of last year. This was above analysts’ estimates for earnings of $9.04 per share. However, revenue rose just 17% year-over-year to $2.2 billion, which missed revenue expectations by $40 million.
In addition, comparable retail sales climbed 10.2%; in-restaurant sales jumped to 15.3%; and restaurant-level operating margin came in at 25.2%. It also opened 42 new restaurants, 32 of which include a “Chipotlane” drive-through. The growth was due in part to the higher menu prices company management instituted to offset the rise in inflation.
Following the second-quarter earnings report, CMG shares rallied 14.7% on above-average volume. So, it’s no surprise that CMG’s Quantitative Grade climbed from a D-rating to C-rating as institutional buying pressure increased.
CMG is not the only company whose rating was adjusted higher or lower over the weekend. After taking a close look at the latest institutional buying pressure and each company’s fundamental health, I decided to revise my Portfolio Grader recommendations for 99 big blue-chip stocks. Chances are that you have at least one of these stocks in your portfolio, so you may want to give this list a skim and act accordingly.
You can check out the first 10 stocks that were upgraded from a D-rating (Sell) to a C-rating (Hold) below… But if you’d like to view the full list of 99 stocks, as well as their Fundamental Grade and Quantitative Grade, please click here.
|Ticker||Company Name||Total Grade|
|CMG||Chipotle Mexican Grill, Inc.||C|
|ESS||Essex Property Trust, Inc.||C|
|OTIS||Otis Worldwide Corporation||C|
|ROK||Rockwell Automation, Inc.||C|
|TAK||Takeda Pharmaceutical Co. Ltd. Sponsored ADR||C|
|TEVA||Teva Pharmaceutical Industries Limited Sponsored ADR||C|
|VALE||Vale S.A. Sponsored ADR||C|
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