Are The Bears Taking Over Chipotle After Earnings?

When Chipotle Mexican Grill Inc. (NYSE: CMG) released third-quarter financial results after markets closed Wednesday, the company posted $3.76 in adjusted earnings per share (EPS) on $1.60 billion in revenue. That compared with consensus estimates of $3.40 in EPS and revenue of $1.59 billion and with earnings of $3.82 per share and $1.4 billion in revenue posted in the same period last year.

During the most recent quarter, comparable restaurant sales increased by 8.3%. Comparable restaurant sales were strong in each month of the third quarter with August being the high point. Sales trends remained strong in September.

At the same time, digital sales grew 202.5% in the quarter and accounted for 48.8% of sales in the quarter.

Restaurant-level operating margin was 19.5%, a decrease from 20.8% in the third quarter of 2019. This move was primarily driven by COVID-19 related impacts including higher delivery expense associated with increased delivery sales, elevated beef prices, increased incidence of steak, and fewer sales of high margin beverages.

Food, beverage and packaging costs in the third quarter were 32.3% of revenue, a slight decrease from the same quarter last year. The decrease was primarily due to the benefit of menu price increases, lower avocado costs, and to a lesser extent, lower salsa usage and waste.

On the books cash, restricted cash, and short-term investments totaled $662.40 million at the end of the quarter, versus $480.63 million at the end of the previous fiscal year.

The company withdrew its 2020 guidance citing the uncertainty related to COVID-19. Analysts are calling for $10.90 in EPS and $5.99 billion in revenue for the full year.

Shares of Chipotle closed Wednesday at $1,360.67, with a 52-week range of $415.00 to $1,384.46. The stock has a consensus analyst price target of $1,310.26. Following the announcement, the stock was initially down 6% at $1,280.00 in the after-hours session.

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