Q1 Preview: Warm Weather, Strong Comps Bode Well for Chipotle (CMG)

Shares of Chipotle Mexican Grill (NYSE: CMG) are about 2 percent lower heading into its first-quarter 2012 earnings, expected out after the market closes.

Wall Street is expecting Chipotle to report EPS of $1.91 on revs of $627 million, compared with EPS of $1.46 and revs of $509.4 million reported in the same period last year. The company issued fourth-quarter 2011 earnings of $1.81 on sales of $596.75 million. Over the last year, shares of Chipotle have moved from $249.58 to $442.40.

Shares have been hanging out at all-time highs recently, until weakness in April hit. Chipotle's stock moved 23.8 percent higher in the quarter to end March around $418. The stock is up 3 percent since then. More notably, shares rose 58.8 percent through 2011 as America's hunger for burritos grew more intense.

Data from Bloomberg shows 12 analysts rate the stock a Buy, 13 rate the stock a Hold, and two are at Sell. The Street's price target average is $432.50, with a low of $300 and high of $500.

Analyst Comments

• Goldman Sachs sees Chipotle with EPS of $2.00 and comps up 11.4 percent (versus the consensus of 10.2 percent ). Though Goldman noted the bar might be high for Chipotle, the firm believes strong comps will help Chipotle best expectations.
  
  Issues Goldman is focusing on include: (1) Will CMG be able to maintain 11-12% SSS growth despite a more difficult compare? (2) Will the company see additional food cost relief from the 4Q12 run rate, buffering margins? (3) Has the company accelerated its move into international markets or with Shop House, its second concept?
  
  
• D.A> Davidson (DAD) sees EPS of $1.88 with revs of $628.8 million, comps up 10.5 percent, and margins expanding 50 basis points. On comps, DAD said, "Our comp assumption is in line with the Street consensus but we have modeled higher operational costs. Upside to our earnings estimate exists if CMG can report stronger than anticipated same store sales, leveraging fixed costs."
  
  Updates expected include management's throughput initiative, weather on the business, food inflation, and ShopHouse Asian Kitchen.
  
  
• Wedbush sees EPS of $1.95 and revs of $628 million On throughput, the firm said, "management's initiatives as lessons from most productive store are implemented system wide. We believe the system wide dissemination in early 2012 of a video of the processes of the system’s most productive store (350 peak tx/hour) has the potential to drive meaningful incremental SSS growth. We routinely observe up to 80 lost transactions in our store checks during peak hours, leading us to believe that the system average of 115 peak tx/hour can grow. We estimate 1 incremental transaction per day contributes 20 bps in incremental SSS growth."
  
  
• Deutsche Bank sees EPS of $1.98 with comps up 12 percent due to more favorable weather through most of the quarter and likely some positive impact from CMG’s throughput initiatives.

Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results within seconds of their release. You can also check out Chipotle's past performance at Streetinsider's Chipotle's Income Statement.

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