Chipotle Gains 4.4% on Impressive Q2 Results

Shares of Mexican food restaurant chain operator Chipotle (CMG) gained 4.4% in extended trading hours on Tuesday after the company reported solid second-quarter financial results.

Chipotle’s menu mainly offers salads, tacos and burritos. Apart from the U.S., the California-based company operates restaurants in France, Germany, Canada and the U.K.

Adjusted earnings per share stood at $7.46, beating the Street’s estimates of $6.49. The company had reported earnings of $0.40 per share in the second quarter last year.

Quarterly revenues increased 38.7% year-over-year to $1.9 billion, marginally surpassing analysts’ expectations of $1.88 billion. Comparable restaurant sales grew 31.2%, while digital sales climbed 10.5% to $916.5 million.

The Chairman and CEO of Chipotle, Brian Niccol, said, “We remain confident in our key growth strategies and believe they will help us achieve our next goal of $3 million average unit volumes with industry-leading returns on invested capital that improve as we continue to add Chipotlanes. Strong restaurant-level economics combined with significant restaurant growth should allow us to optimize earnings power for many years to come.”

For the third quarter, the company expects comparable restaurant sales to grow in the low to mid-double-digits range. (See Chipotle stock chart on TipRanks)

Last week, Credit Suisse analyst Lauren Silberman reiterated a Buy rating on the stock with a price target of $1,950 (24% upside potential). In anticipation of the second-quarter results, the analyst said, “CMG continues to be one of our favorite near-term and long-term stocks as a rare compounding growth story positioned for double-digit top-line and margin expansion over the years to come.”

Overall, the stock has a Moderate Buy consensus based on 16 Buys and 7 Holds. The average Chipotle price target of $1,710.14 implies 8.6% upside potential. Shares have gained 35.4% over the past year.

According to TipRanks’ Smart Score rating system, Chipotle scores an 8 out of 10, suggesting that the stock is likely to outperform market averages.

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