Chipotle Mexican Grill announced its fourth-quarter earnings, surpassing expectations and causing the stock to rise in after-hours trading on Tuesday. The company reported adjusted earnings of $10.36 per share, exceeding the forecasted $9.71 per share. Sales of $2.5 billion increased by 15.4% compared to last year, aligning with analysts' predictions.
Strong Performance in 2023
Chipotle's CEO, Brian Niccol, expressed his satisfaction with the company's performance in 2023. He attributed their success to impressive transaction growth driven by throughput and menu innovation. Additionally, they opened a record number of new restaurants, achieved over $3 million in average unit volume (AUV), and formed their first international partnership.
Optimistic Outlook for 2024
For the year 2024, Chipotle is forecasting mid-single digit growth in same-store sales, surpassing consensus estimates of a 5.3% increase. This positive outlook reflects the company's confidence in steady sales and earnings growth.
Additional Share Repurchases
Chipotle's stock experienced a 3.9% increase in after-hours trading on Tuesday.
Stay tuned for more analysis on this breaking news.
Analysts Expect Strong Q4 Results
Leading up to Chipotle's fourth-quarter earnings report, analysts have shown optimism regarding the company's performance. According to FactSet consensus estimates, analysts project earnings of $9.71 per share on $2.49 billion in revenue. Same-store sales, indicating the revenue generated from stores open for more than a year, are expected to rise by 7.1%.
Increasing Confidence in Chipotle
The Street's confidence in Chipotle's ability to meet these targets has grown recently. Earnings estimates have been adjusted 0.2% higher in the past week and 1.5% higher over the past three months, according to FactSet data.
"We believe Chipotle's consistent sales and earnings growth is among the best in the publicly traded restaurant industry," stated Sharon Zackfia, an analyst at William Blair, in a recent note.
Chipotle will release its earnings after the market closes on Tuesday, followed by an investor call at 4:30 p.m. Eastern time.
Chipotle's Stock Performance
Shares of Chipotle have outperformed the S&P 500 and the AdvisorShares Restaurant ETF this year, with an 8.3% increase. This positive market sentiment, however, comes with a caveat. Chipotle's stock is considered expensive, trading at 45.6 times forward earnings, well above its competitors. In comparison, the AdvisorShares Restaurant ETF had a P/E ratio of 23.2. Consequently, investors expect exceptional performance from the company.
Strong Performance in Q4
Despite a decline in foot traffic across the fast-food industry, Chipotle experienced a 4.3% increase in foot traffic during the fourth quarter of last year. This growth sets Chipotle apart from its competitors and demonstrates its potential for continued success. Moreover, the company still has the opportunity to raise prices to offset rising labor costs and other expenses, which can further contribute to its profitability.
Analyst's Perspective
UBS analyst Dennis Geiger highlights the positive outlook for Chipotle, emphasizing its traffic momentum and growth potential. Geiger believes that these factors alone justify a premium valuation for the company. He also states that Chipotle is well-positioned within the sector for traffic outperformance and margin gains throughout 2024.
Potential Concerns
There are concerns that Chipotle may lower its guidance for the first fiscal quarter due to a slowdown in restaurant industry sales caused by an unusually cold January. However, analysts, such as Jon Tower from Citi, suggest that this expected decline should not come as a surprise to investors.
In summary, while Chipotle's stock carries a high price tag, its strong performance in terms of foot traffic and potential for future growth make it an attractive investment option.
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