Chipotle Ready To Serve Earnings (CMG)

Chipotle Mexican Grill (NYSE:CMG) posts earnings after the close today.  The analysts that follow the stock are looking for EPS of $0.45 on revenues of $262.9 million according to First Call.  The estimates for Q3 are $0.46 EPS and $272.4 million.  As a reminder, Chipotle has a history of exceeding earnings estimates and based on its strong performance you can imagine that Wall Street is going to demand another "beat expectations and raise guidance" today.

The stock performance has been amazing.  Shares are within 6% of all-time highs since coming public and are up about 75% over the last year.  Analysts are now mixed on the stock as most Wall Street price targets have been met or exceeded.  On a static basis, options traders are braced for a move of up to $4.60 or so in either direction based on mid-morning prices today. 

A wildcard is of course wholesale food prices, and the spike in avocadoand corn prices are no secret.  It has a secured meat supplyarrangement (or has in the past) so you’ll know where to look today.  It has been a while since Cramer backed the stock, but he definitely increased the cult following in the stock.  The other wildcard is the large short interest since the 4.34 million shares in June that rose a tad to 4.36 million in July.  That is close to 15% of its float and represents more than 10 days average trading volume.  With shares this close to a high and the stock being so leveraged, the shorts could get squeezed hard if this one posts another significant ‘beat and raise’ for the quarter and its outlook.  We’ll know in about 5 hours.

Jon C. Ogg
July 31, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.