Chipotle & Other Restaurant Stocks To Serve Up Earnings Beats

 | Feb 03, 2020 08:53PM ET

Chipotle Mexican Grill, Inc. (NYSE:CMG) was, undoubtedly, a top-notch performer last year, with its shares surging 94%. Even though there have been highs and lows for the fast-casual restaurant chain it has been the best-performing restaurant stock for quite some time now. With that kind of a stellar performance in the rearview mirror, it’s quite tempting to see how the company will perform this earnings season.

What to Expect From Chipotle’s Earnings?

Chipotle is set to report fourth-quarter earnings after market close on Feb 4. In the third quarter, the company’s comparable-restaurant sales numbers improved 11% year over year, while digital sales grew a whopping 88%. In fact, digital sales accounted for more than 18% of total sales in the third quarter.

What’s more, comparable-restaurant and digital sales are widely expected to have improved in the fourth quarter, thanks to an uptick in consumer outlays on food services. Americans have not only been confident about their well-being in the fourth quarter but have also increased their spending on food services by 4.8% on a year-over-year basis.

And the company’s initiative to improve customers’ digital experience is likely to have driven digital sales in the fourth quarter. Lest we forget, the company announced the installation of digitalized make-lines in almost all restaurants. At the same time, launch of a customer loyalty program Chipotle Rewards is also expected to have driven digital sales.

Furthermore, the company’s revenues are expected to have improved on relevant promotions and unique marketing campaigns. While the company’s “Meatless Mondays” promotion started at the beginning of the fourth quarter, its “Buy-One Get-One Free” promotion was held on Veteran’s Day.

Chipotle, in the meantime, ramped up marketing for the ever-popular Tik Tok app through collaboration of its ad campaigns with Tik Tok’s biggest stars during the Super Bowl. Incidentally, Chipotle informed its customers in November that they can use Alexa to order their preferred Chipotle meals.

Menu innovation is another primary factor that should be driving Chipotle’s revenues. Among the array of food products, queso blanco, Chipotle’s spicy, smokey cheese dip has received encouraging reviews. Chipotle’s experiment with carne asada and quesadillas is also garnering appreciation.

For the fourth quarter, analysts expect Chipotle to report revenues of $1.40 billion— suggesting a rise of 14.4% from $1.23 billion in the fourth quarter of 2018. The Zacks Consensus Estimate for earnings per share is pegged at $2.75. This indicates a solid increase from year-ago earnings of $1.72.