New highs for Chipotle as Street predicts momentum will continue

"With most restaurants struggling to drive positive traffic, CMG remains an anomaly, justifying an outsized valuation, with scarcity worth the premium," says Barclays in response to Chipotle's (CMG +12.8%) big Q2 beat. However, the firm is hesitant to recommend shares, given they now trade at 39x forward EPS.

"As more of Chipotle’s markets are touched with menu price increases this quarter, the company is teed up for at least another two quarter of strong earnings growth," thinks Belus Capital.

The company attributes only 250 bps of its 17.3% same-store growth (blew away a consensus of 10.5%) to its price hikes. Average transactions during peak lunch and dinner hours each rose by 8 Y/Y, and average check size rose by 5%, thanks partly to larger group sizes.

Chipotle did admit on its CC (transcript) its price hikes led to a "slight shift" among customers from steak to chicken, but insists "customers have generally responded well" otherwise. The company also noted it's experimenting with take out-focused restaurants that have limited seating, particularly in U.S./European locales with high real estate costs.

Prior Chipotle earnings coverage

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Comments (7)
  • Joe2922
    , contributor
    Comments (486) | Send Message
    Chipotle is not Mexican food, and not very tasty. It is the McDonalds of Mex in the U.S. where it was co-founded and owned by McD which sold its 25% stake many yrs. ago.
    There are far better meals at the same or lower prices at locally-owned rest. owned & operated by Mexicans.
    I feel sorry for anyone who eats at Chipotle, they are cheating themselves and treating their taste buds and wallets poorly..
    22 Jul 2014, 12:36 PM Reply Like
  • Energysystems
    , contributor
    Comments (2124) | Send Message
    ...and McDonald's made a huge mistake selling $CMG.
    22 Jul 2014, 01:10 PM Reply Like
  • chopchop0
    , contributor
    Comments (5265) | Send Message
    CMG is better than other fast food alternatives. Fresher, humanely raised meat.
    22 Jul 2014, 01:54 PM Reply Like
  • Energysystems
    , contributor
    Comments (2124) | Send Message
    I agree chop. Great tasting and quality ingredients. They also have a knack at location. The two closest to me, one right next to the local college, and one across the street from the local air force base. Both are always packed, lines that go around the building and out the door.
    22 Jul 2014, 01:57 PM Reply Like
  • C.N
    , contributor
    Comments (263) | Send Message
    Used to be that you could get a meal at a MCD, Jack in the box or Burger King for $4-5 and now it costs close to 7 dollars, so folks just go to CMG and get a burrito for 7 dollars.
    22 Jul 2014, 05:58 PM Reply Like
  • Mark Krieger
    , contributor
    Comments (6489) | Send Message
    you still can...just stick with the value menu and drink free can easily stay in the $-5 range at QSR's
    22 Jul 2014, 07:24 PM Reply Like
  • oxcart
    , contributor
    Comments (6) | Send Message
    CMG builds loyal customers not lowest price shoppers. They are building a tribe of followers who relate to CMG's core values. Unlike a Taco Bell who introduces a new high fat, unhealthy item every week, CMG creates a menu that appeals to food and health conscious customers willing and able to pay extra for this approach. Yes there are now more obese people than healthy ones around the world that would prefer the Mickey D and Taco Bell slop but they are not the CMG target customers. The recent Q2 results support this strategy.
    28 Jul 2014, 03:18 PM Reply Like
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