Chipotle’s 4Q Profit Disappoints Due To COVID-19 Costs; Shares Slip

Shares of Chipotle Mexican Grill declined 2.8% in Tuesday’s extended trading after the fast-casual restaurant operator reported lower-than-expected fourth-quarter results.

Chipotle’s (CMG) 4Q adjusted earnings rose to 21.7% $3.48 per share year-on-year but fell short of the Street’s estimates of $3.73 per share. Revenue during the reported quarter increased 11.6% to $1.6 billion year-over-year and came in marginally lower than analysts’ expectations of $1.61 billion.

The company said, “The adjusted diluted earnings per share was negatively impacted 32 cents by several items due to the increased severity of the COVID-19 pandemic including exclusion pay and higher medical claims, as well as 9 cents from performance bonus accruals.”

Chipotle top-line was driven by a 5.7% increase in comparable-store sales and the opening of 61 new restaurants. Meanwhile, a 177.2% spike in digital sales accounted for almost half of the total sales growth in the quarter.

As for 1Q, the company said, “Assuming the pandemic doesn’t worsen, we expect first-quarter 2021 comparable restaurant sales to be in the mid to high teens range given an easier comparison during the second half of March.” Chipotle expects to open around 200 new restaurants in 2021. (See Chipotle stock analysis on TipRanks)

Following the earnings results, Oppenheimer analyst Brian Bittner maintained a Hold rating on the stock citing its valuation. Shares have gained about 75.7% over the past year.

Bittner commented in a note to investors, “We are positively biased toward the business, but given shares at ~54x P/E off ’22E, we await a better entry.”

“Sales momentum is solid; margins could nicely improve as incremental expenses fade. But, we have low visibility into restoration of historical sales/margin relationship (e.g., $2.5M AUV’s/25% margins), which we believe is required to underwrite a powerful earnings upside thesis at current levels,” the analyst added.

The rest of the Street has a cautiously optimistic outlook with a Moderate Buy consensus rating based on 12 Buys and 6 Holds. The average analyst price target of $1,542 implies upside potential of about 1.2% to current levels.

Meanwhile, the TipRanks’ stock investors tool shows that investors currently have a Very Negative stance on CMG.

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