Today's stock market
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Defense stocks got a boost on news of a budget agreement that would push military spending higher; the iShares US Aerospace & Defense ETF (NYSEMKT:ITA) rose 1.4%. Energy stocks took a hit on falling crude prices, with the SPDR S&P Oil & Gas Exploration & Production ETF (NYSEMKT:XOP) losing 3.3%.
As for individual stocks, investors gave Snap Inc. (NYSE:SNAP) a big vote of confidence after it reported Q4 results, and Chipotle Mexican Grill (NYSE:CMG) beat profit estimates, but raised concerns about its sales growth.
Snap adds users, grows ad revenue
Social media company Snap announced its best quarter since going public, and shares soared 47.6%. Results for the first quarter beat expectations on the top and bottom lines, with revenue up 72% to $286 million and a non-GAAP net loss of $0.13 per share. Analysts were expecting a loss of $0.16 per share on revenue of $253 million. For the full year, revenue more than doubled to $825 million.
User engagement and monetization metrics were much improved over the third quarter. Snap added 8.9 million daily active users during the quarter to bring the total to 187 million. Average revenue per user was $1.53, up 31% from last quarter. Cost of revenue per user was $1.04, which was down 14% sequentially. Snap burned through $255 million in cash in Q4, 49% less than in Q3, leaving a cash balance of $2.04 billion.
Investors clearly thought this quarter was an important step in the right direction for Snap. A redesign of the app seems to be working to draw in users, and improvements in programmatic tools for advertisers led to a 38% increase in ad dollars since Q3, despite tough competition from other social media platforms. Some disciplined cost-cutting is also helping trim losses.
Chipotle's earnings beat wasn't enough to allay concerns about 2018
Shares of Chipotle Mexican Grill sank 10.6% after the company reported earnings that beat expectations, but stoked concerns about declining traffic in its stores. Revenue increased 7.3% to $1.11 billion, about in line with expectations, and earnings per share grew to $1.55, up from $0.55 in the period a year earlier. Excluding a one-time tax benefit, adjusted EPS of $1.34 beat estimates by $0.02.
Comparable-restaurant sales increased 0.9% during the quarter, which included a 0.6% reduction due to some one-time, deferred revenue that was recognized in the period a year ago. The increase in comps was all due to menu price increases that had a 2.4% impact on the metric. Traffic was down 3% in the quarter, continuing a trend that began last July. Restaurant-level operating margin improved to 14.9% from 13.5% last year.
Looking forward, Chipotle expects comparable-restaurant sales increases in the low single digits for the full year 2018, and between 130 and 150 new restaurants opening, compared with a net increase of 158 stores in 2017. "Our focus this year will be to continue perfecting the dining experience, enhancing the guest experience through innovations in digital and catering, and reinvesting in our restaurants," said founder and CEO Steve Ells in the press release.
Chipotle expects the negative traffic trend to continue until the middle of the year, when results lap the July decline last year. The company also expects that a loyalty program that will be introduced during the year and increased television advertising will improve traffic in the second half. Investors were disappointed, though, expecting a stronger comeback in 2018.