CMG

Chipotle Confident in Achieving 7,000 North American Units

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Image Source: TradingView By Brian Nelson, CFA Chipotle Mexican Grill (CMG) recently reported fourth quarter results that were better than consensus forecasts on both the top and bottom lines. Total revenue increased 4.9% but the pace of growth was weighed down by a 2.5% decrease in comparable restaurant sales. Its operating margin in the fourth quarter was 14.1%, declining from 14.6% year-over-year. Restaurant level operating margin also fell 140 basis points, to 23.4%, in the quarter. Diluted earnings per share increased 4.2%, while adjusted diluted earnings per share remained flat at $0.25. During the quarter, Chipotle opened 132 company-owned restaurants, with 97 locations including a Chipotlane, and seven international partner-operated restaurants. Management had the following to say about the results: … Read more

Chipotle Facing Consumer Spending Pressures

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Image Source: TradingView By Brian Nelson, CFA On October 29, Chipotle (CMG) reported disappointing third quarter results with revenue missing the mark and non-GAAP earnings per share coming in-line with expectations. In the quarter, total revenue increased 7.5%, to $3 billion, while comparable restaurant sales increased 0.3%, bolstered by a 1.1% increase in average check, partially offset by lower transactions of 0.8%. Chipotle’s operating margin was 15.9%, a decline from 16.9%, while its restaurant level operating margin also fell to 24.5% from 25.5% previously, as the company faced higher protein and labor costs as well as tariff pressures. Adjusted diluted earnings per share increased 7.4%, to $0.29, in the quarter. It opened 84 company-owned restaurants, with 64 locations including a … Read more

Thinking Slow: 3 Research Blind Spots That Changed the Investment World

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Dear members: — Daniel Kahneman in his text Thinking, Fast and Slow (1) divided the human psyche into two systems. The first system is instinctive and emotional, often set on autopilot, while the second system is slower and more logical, requiring a calculating conscious. Many of the maxims the investment world takes for granted today suffer from conclusions that are made rapidly, almost without thinking, driven by our first system, creating what I call research blind spots. — In World War II, Allied bombing raids were suffering from very high casualty rates. It was estimated that for those pilots that were flying at the beginning of the war, only about 10% survived, a terrible loss rate. Bombing was crucial to the Allied … Read more

Chipotle Now Expects Flat Comps for 2025

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Image Source: Valuentum By Brian Nelson, CFA On July 23, Chipotle (CMG) reported disappointing second quarter results with non-GAAP earnings per share coming in line with the consensus forecast, but revenue missing what the Street was looking for. Total revenue increased 3% in the quarter thanks to new restaurant openings, but comparable restaurant sales fell 4% due to lower transactions, and its operating margin dropped to 18.2%, down from 19.7% in the prior-year period. The Street had been looking for a 2.9% decline in comp sales in the quarter. Restaurant level operating margins fell to 27.4% from 28.9% in last year’s quarter. Adjusted diluted earnings per share was $0.33 in the quarter, down 2.9% from the second quarter of last … Read more

3 Undervalued Stocks to Consider Buying Now

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Dear readers:   With the markets retracing most of their recent drawdown, we’re taking a victory lap as we didn’t panic, nor should have you. We highlighted our wait-and-see approach amidst the worst of the pullback, and we expect the Magnificent 7 (large cap growth and big cap tech) to continue to propel the markets higher, as they have done.   We’ve been busy rolling valuation models as we finetune our assumptions for a great number of companies under coverage. While doing so, we came across three undervalued stocks that are also included in the simulated newsletter portfolios. We think they’re prime for highlight.   The three stocks are UnitedHealth Group (UNH), Nvidia (NVDA) and Alphabet (GOOG). We spend a lot of time on discounted cash-flow valuation, … Read more

Magnificent 7 Earnings Reports Not Bad Thus Far

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By Brian Nelson, CFA   Shortly after Trump’s Liberation Day, where the President unveiled lofty tariffs on numerous countries, we released our wait-and-see outlook for the equity markets, which thus far has proven to be the right move, with the markets largely recovering from the depths reached in April. The S&P 500 (SPY), for example, is down just 3.3% year-to-date, excluding dividends.   A lot has happened since Liberation Day, including easing of tariffs to a 10% baseline for most, if not all, countries, with the key exception of China, where tariffs remain extremely elevated and prohibitive. Many countries are now reportedly negotiating trade agreements with the White House, and we expect China to be added to that list soon, even if … Read more

Chipotle’s Comparable Restaurant Sales Fall in First Quarter

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Image Source: Valuentum By Brian Nelson, CFA  On April 23, Chipotle (CMG) reported mixed first quarter results with non-GAAP earnings per share exceeding the consensus forecast, but revenue coming up a bit short relative to expectations. Total revenue increased 6.4%, to $2.9 billion, but comparable restaurant sales fell 0.4%, a disappointment. Chipotle’s operating margin came in at 16.7% in the quarter, an increase from 16.3% in the prior year period. Restaurant level operating margins fell, but the company still grew diluted earnings per share 7.7%, to $0.28, in the quarter. Adjusted diluted earnings per share increased 7.4% year-over-year.  Management spoke of concerning consumer spending trends in the press release:  While our first quarter results were impacted by several headwinds including weather … Read more

Trump Tariffs Higher than Expected; What We’re Doing

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By Brian Nelson, CFA The Trump tariff increases came in larger than what we were expecting, and it remains to be seen how they will flow through the global economy, as we monitor potential retaliatory tariffs from other countries. As it relates to the equity markets, we’re taking a wait and see approach at the moment as we monitor new policy changes related to trade, immigration, fiscal (tax), and regulations. In short, we’re not overreacting to the sell off as we won’t have a great handle on the tariff impact to companies for a few quarters when they report results post-tariff increases. That said, we’re expecting continued market volatility, with meaningful risk to the downside, before trade uncertainty alleviates in … Read more

Chipotle’s Long-term Growth Prospects Are Impressive

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Image Source: Valuentum By Brian Nelson, CFA On February 4, Chipotle (CMG) reported fourth quarter results that were in-line with the consensus forecasts for the top and bottom lines. Total revenue in the fourth quarter increased 13.1%, while comparable restaurant sales advanced 5.4% consisting of higher transactions of 4% and a 1.4% increase in average check. The company’s operating margin increased ~20 basis points, to 14.6%. Its restaurant level operating margin fell to 24.8% from 25.4% in last year’s quarter, however, due to higher food, beverage and packaging costs as well as higher labor expenses. Adjusted diluted earnings per share nonetheless advanced 19%, to $0.25. During the quarter, Chipotle opened 119 company-owned restaurants with 95 of the locations including a … Read more

Chipotle Targets 7,000 Restaurants in North America

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By Brian Nelson, CFA Chipotle (CMG) reported mixed third quarter results October 29 with revenue coming in a bit light relative to expectations and non-GAAP earnings per share outpacing the consensus forecast. Total revenue increased 13% in the quarter thanks to a 6% increase in comparable restaurant sales and new restaurant openings. Comparable restaurant sales missed the consensus estimate calling for 6.4% growth. Still, Chipotle’s comparable restaurant sales growth consisted of higher transactions of 3.3% and a 2.7% increase in average check, a combination we view positively. The burrito-maker’s operating margin was 16.9% in the quarter (consensus was at 15.7%), up from 16%, while adjusted diluted earnings per share came in at $0.27, up from $0.23 in the prior-year period. … Read more