Chipotle Mexican Grill Inc. (NYSE: CMG) is still looking to recover from its whole E. coli debacle, and this earnings report could be just the thing this burrito chain needs. The company is scheduled to release its second-quarter financial results after the markets close on Thursday.
Thomson Reuters consensus estimates call for $0.93 in earnings per share (EPS) on $1.05 billion in revenue. In the same period of last year, EPS came in at $4.45, on revenue of $1.2 billion.
Recently one key analyst downgraded Chipotle ahead of its earnings report, and unsurprisingly it was a far cry from positive. Morgan Stanley lowered Chipotle to an Equal Weight rating from Overweight and slashed the price target to $405 from $500 (versus a $417.98 prior close).
Morgan Stanley had been bullish on Chipotle through the past year’s turmoil, hoping the restaurant chain could quickly get past its woes. But after nearly three years in the bull camp, Morgan Stanley gave up that case. This change of opinion was based on new evidence that the sales recovery will remain more protracted than the market believes.
Furthermore, the firm believes that it also might end up being more costly, considering Chipotle’s increased advertising to lure consumers back. Also, the company initiatives that involve giving out free meals and rewards plans can further add to the costs.
In the eyes of Morgan Stanley, getting back to prior sales highs could be a multiyear journey, as the firm’s survey found that roughly a quarter of Chipotle’s customers either have stopped going or reduced their frequency — even six months after the last reported food-safety incident.
A few other analysts weighed in on Chipotle as well:
- Oppenheimer reiterated a Market Perform rating.
- Wells Fargo reiterated an Outperform rating.
- RBC Capital Markets reiterated a Buy rating with a $485 price target.
- Creidt Suisse reiterated an Outperform rating.
- Goldman Sachs reiterated a Neutral rating with a $490 price target.
- Cowen reiterated a Hold rating.
- Piper Jaffray reiterated an Overweight rating with a $590 price target.
- Nomura reiterated a Hold rating.
- BMO Capital Markets reiterated an Outperform rating with a $550 price target.
- Jefferies reiterated a Sell rating.
- Sanford Bernstein reiterated a Buy rating with a $730 price target.
So far in 2016, Chjipotle has underperformed the broad markets, with the stock down about 13%. Over the past 52 weeks, the stock is down 38%.
Shares of Chipotle were trading down 0.7% at $416.56 on Thursday, with a consensus analyst price target of $456.21 and a 52-week trading range of $384.77 to $758.61.
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