Can Chipotle Keep Its Rally Alive With Earnings?

Chipotle Mexican Grill Inc. (NYSE: CMG) is scheduled to report its fourth-quarter financial results after the markets close on Tuesday. The consensus estimates from Thomson Reuters call for $1.86 in earnings per share (EPS) on $1.01 billion in revenue. The same period from the previous year had $3.84 in EPS on $1.07 billion in revenue.

This company has now become synonymous with salmonella, norovirus and E. coli. It was that one-two-three punch that helped tear shares down 37% from their 2015 highs. Since mid-January though, Chipotle has been on a tear in the exact opposite direction.

The question of whether Chipotle’s competitors will benefit noticeably from the restaurant chain’s fall from grace has long been on the minds of investors ever since the infamous outbreaks began.

At this point, it seems that shareholders have magnanimously forgiven the chain for its misdeeds, and possibly customers to follow, allowing the company to maintain its position given a little more time for recovery.

Look at it this way: If Chipotle can perform while being handicapped with three different food poisoning scandals, then unhampered it probably will break away. The past month has shown what it can do. As long as it is serious about food safety being its top priority, the company has the potential to recover and continue growing.
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A few analysts weighed in on Chipotle prior to the release of its earnings report:

• Merrill Lynch upgraded it to a Neutral rating from Underperform.
• Guggenheim reiterated a Hold rating.
• William Blair reiterated an Outperform rating.

So far in 2016, Chipotle has outperformed the broad markets, with the stock down only 1.5%. However, over the past 52 weeks the stock is down about 33%.

Shares of Chipotle were trading up 2% at $482.70 on Tuesday, with a consensus analyst price target of $484.30 and a 52-week trading range of $399.14 to $758.61.