Chipotle Mexican Grill (CMG) stock drops after 'disappointing' and 'choppy' Q4 results

Chipotle Mexican Grill (NYSE: CMG) shares are trading over 5% lower in pre-open Wednesday after the burrito chain reported weaker-than-expected earnings for its fourth quarter.

CMG posted an adjusted EPS of $8.29 on revenue of $2.18 billion, missing the average analyst consensus for earnings of $8.92 on revenue of $2.2B. Same-store sales were up 5.6% year-over-year but again below the 6.9% consensus.

"We delivered strong growth in 2022, expanding average unit volumes and restaurant level margin, while opening the highest number of new restaurants in six years, despite facing a challenging and fluid macro environment," said CEO Brian Niccol.

The company said it opened 100 new restaurants, up 28% YoY. The operating margin was reported at 13.6%, below the estimate of 14.7%.

For 2023, CMG projects to open between 255 and 285 new restaurants. The company said that comparable sales are up low double-digit in January.

“We anticipate first quarter comparable restaurant sales growth in the high-single-digits,” Chipotle said.

The company also announced a new $200 million stock buyback plan, approved by the board.

Wolfe Research analyst Greg Badishkanian said the Q4 results were disappointing, although CMG pointed toward improving momentum for this quarter.

Truist analyst Jake Bartlett cut the price target by $25 to $1,800 per share to reflect a “choppy” Q4.

“Recent traffic trends should help ease investor concerns that CMG took too much menu price in '22, and we expect traffic to remain positive throughout '23, supported by improved operations. Despite NT margin headwinds, we continue to expect significant margin expansion in '23 and '24 with potential upside,” Bartlett said in a note.

By Senad Karaahmetovic

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