Image Source: Valuentum
By Brian Nelson, CFA
On October 26, Chipotle Mexican Grill (CMG) reported better-than-expected third-quarter results with the top line increasing 11.3% on a year-over-year basis and non-GAAP earnings per share beating the consensus estimate. Comparable store sales advanced 5% in the period, while the company drove meaningful improvement in its operating margin, despite nagging inflationary pressures in beef and cheese prices. We’re huge fans of Chipotle’s long-term unit growth story, and we expect the rollout of Chipotlane drivethru’s to pave the way for an expanded menu, maybe in the breakfast daypart in the years ahead. Here’s what CEO Brian Niccol had to say about the ahead.
Chipotle’s value proposition including customized, delicious culinary served quickly with great hospitality, is stronger than ever which is translating to great results including sustained positive transaction growth. We remain focused on developing exceptional people, preparing delicious food and fast throughput which will further strengthen our brand and continue to position us for long term growth.
Chipotle’s digital efforts are paying off as digital sales accounted for 36.6% of the company’s total food and beverage revenue in the period, as the restaurant continues to meet customer ordering preferences. Management expects comparable store sales to accelerate to the mid-to-high single-digit range in the current calendar fourth quarter, and we couldn’t be pleased with the outlook that calls for another 285-315 new restaurant openings in 2024. We didn’t see anything in the quarterly results that would alter our long-term view on Chipotle, and the company remains a key idea in the simulated portfolio of the Best Ideas Newsletter. Our fair value estimate stands at $2,212 per share.
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Brian Nelson owns shares in SPY, SCHG, QQQ, DIA, VOT, BITO, RSP, and IWM. Valuentum owns SPY, SCHG, QQQ, VOO, and DIA. Brian Nelson’s household owns shares in HON, DIS, HAS, NKE, DIA, and RSP. Some of the other securities written about in this article may be included in Valuentum’s simulated newsletter portfolios. Contact Valuentum for more information about its editorial policies.
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