Will Higher Costs Impact Chipotle's (CMG) Q1 Earnings?
Zacks Investment Research | Apr 18, 2018 10:54PM ET
Chipotle Mexican Grill, Inc. (NYSE:CMG) is scheduled to report first-quarter 2018 earnings on Apr 25, after market close.
Last quarter, the company’s earnings surpassed the Zacks Consensus Estimate by 1.5%. Moreover, it surpassed estimates in three of the trailing four quarters, with an average beat of 4.8%.
What to Expect?
The Zacks Consensus Estimate for the quarter under review is pegged at $1.53, which is lower than $1.60 in the year-ago quarter. Also, the consensus mark has witnessed a sharp downward revision of 64 cents over the past 90 days. However, analysts polled by Zacks expect revenues of nearly $1,148 million, up 7.4% from the prior-year quarter.
Chipotle has been particularly plagued by negative publicity related to food-borne illnesses, which surfaced toward 2015-end and continued through 2016. Since then, the company has undertaken many safety measures and sales-building initiatives to revive its top line.
Let’s take a look at how the company’s top and bottom lines will shape up in the to-be-reported quarter.
Factors at Play
Strategic Initiatives to Drive Sales
Chipotle’s top line, which witnessed a sharp increase of 7.3% in fourth-quarter 2017, is likely to continue with the momentum in the quarter to be reported. The company’s strong marketing initiatives, ongoing improvements in customer experience, improved digital ordering channels and increased focus on menu innovation are the key growth drivers.
Additionally, Chipotle is continuously trying to recover sales by shifting its strategy from giveaways, discounts and rewards to new menu items, operational excellence and enhancement of guest experience. Toward this end, the company rolled out queso nationally in the third quarter of 2017, following which it witnessed an immediate increase in sales. This uptick is expected to continue in the to-be-reported quarter as well.
In the fourth quarter, the company implemented a menu price increase at an additional 900 restaurants that should help boost the company’s top-line performance. In addition, management is designing a new beverage program for Chipotle, which includes a complete redesign of the beverages it serves and how they are merchandised to customers.
Furthermore, Chipotle’s focus on developing new food safety protocols is impressive. These protocols include DNA-based testing of several ingredients coupled with changes to food preparation and food handling practices. The company’s enhanced focus on making better food accessible to everyone should also drive traffic in the first quarter.
Chipotle Mexican Grill, Inc. Price, Consensus and EPS Surprise
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