Investors had modest expectations heading into Chipotle's (CMG 0.55%) fourth-quarter earnings report. Some of the biggest concerns included how the company was dealing with spiking production costs and labor shortages, and if it was having trouble passing along higher prices.

But the burrito giant eased those worries by announcing solid sales and profit trends. Management even raised its long-term growth expectations and announced an accelerated plan for more Chipotle locations in smaller metropolitan areas.

Let's dive right in and analyze the details from this latest report.

A chef cooking Tex-Mex cuisine.

Image source: Getty Images.

Sales trends remain positive

Heading into the report, most investors were looking for revenue to expand in the low- to mid-double-digit percentage range, consistent with the outlook that management provided back in late October. Chipotle edged past that prediction, as comparable-store sales rose 15.2%. That result marked a slight acceleration compared to the previous quarter's expansion rate.

The chain also added 78 new locations in Q4, allowing overall sales to jump 22% to cross $2 billion for the quarter and increase 26% and total $7.5 billion for the full year. "2021 was an outstanding year for Chipotle," CEO Brian Niccol said in a press release.

Chipotle got help from a few places, including the new smoked brisket menu offering. Its popular order-ahead mobile app and drive-thru services were even bigger hits.

These conveniences helped digital sales remain high even compared to soaring results during earlier phases of the pandemic. Digital revenue for the quarter landed at $811 million, or 41% of all sales. The spread of the omicron variant of the coronavirus hurt customer traffic in late December, management said, but that pressure has started to ease.

Cost spikes offset by price hikes

The earnings picture wasn't as bad as many investors had feared. Yes, soaring costs impacted the bottom line. Chipotle saw extreme inflation on beef and freight prices. Costs rose on labor and avocados, too.

But solid growth, plus rising prices, offset these challenges. Overall, restaurant profitability rose to 20.2% of sales from 19.5% a year ago. Before-tax income improved to $168 million, or 8.5% of sales, from $118 million, or 7.3% of sales.

A new growth act?

Management's initial outlook for 2022 was positive. Chipotle is feeling less pressure from the pandemic as COVID-19 case numbers subside. Comps should rise by nearly 10% in Q1, on top of the prior year's 17% spike.

Investors should be even more excited by management's brightening long-term outlook. Success with Chipotle's push into drive-thru services and smaller metro areas has the chain targeting a wider footprint across the country. Smaller-town locations are producing cash flows and profitability figures that are at least as good as the high-traffic stores the company has traditionally targeted.

As a result, management now sees room for 7,000 restaurants across the country, up from the prior prediction of 6,000. The chain currently operates roughly 3,000 units today.

That brighter outlook will have immediate benefits, including accelerated store launches in 2022. Chipotle is targeting as many as 250 new locations this year, compared to 215 in 2021.

Over the next several years, management sees room to expand Chipotle's store footprint by between 8% and 10% annually. Combined with solid sales growth at existing locations, that prediction suggests Chipotle has several more years ahead where investors can reasonably expect to see near 20% overall sales growth.

The long-term profit picture is similarly bright, as Chipotle has demonstrated that it can boost margins even through some of the worst inflation conditions it has seen as a restaurant brand.