It's round two for burrito king Chipotle (NYSE:CMG). This "being public" thing worked so well for it last quarter, when the McDonald's (NYSE:MCD) spinoff's Q4 2005 earnings report trounced analyst estimates, that Chipotle has decided to give it another go. The company reports its Q1 2006 numbers Monday after close of market.
What analysts say:
- Buy, sell, or waffle? A baker's dozen of analysts follow Chipotle, which rates three buys, two sells, and eight holds.
- Revenues. Analysts will be looking for $171.7 million in sales Monday.
- Earnings. And $0.12 per share in profits.
What management says:
Chipotle hasn't said much of interest since its last earnings report came out, but, oh, what it said back then. Sales had grown 36% versus Q4 2005, accelerating from the already-blistering full-year pace of 33%. Same-store sales were up 14% -- again, an acceleration from 2005's overall 10% same-store sales growth rate -- and income from operations quintupled to $31 million for the year. And how did the understated CEO, Steve Ells, sum up the report? By saying the year was "strong" and the company made "considerable progress."
According to CFO Jack Hartung, investors should look for more of the same in 2006, with Chipotle aiming to "maintain our momentum with existing restaurants and continue to pursue great restaurant locations in both new and existing markets." Or in Wall Street-speak: Look for more same-store sales growth, and more sales growth overall.
What management does:
And margins. Don't forget the margins. Over the last five quarters for which we have data broken out for Chipotle, gross, operating, and net margins have all been expanding. The result for profits has been akin to pouring gasoline on a sales receipts-fueled fire.
|
Margins % |
12/04 |
3/05 |
6/05 |
9/05 |
12/05 |
|---|---|---|---|---|---|
|
Gross |
29.9 |
30.2 |
30.5 |
31 |
31.7 |
|
Op. |
1.7 |
2.4 |
3 |
3.7 |
5.4 |
|
Net |
1.3 |
3.5 |
5.3 |
5.1 |
6 |
The Fool says:
Speaking of margins, expect to see the rolling, or trailing-12-month net results, slip a bit Monday. As both fellow Fool Steven Mallas and I observed back in March, Chipotle's net margin looks a bit better than it truly should as a result of a pair of $7.5 million tax credits it recorded in H1 2005. The first of those credits falls off the back end of the trailing-12-month tally Monday, and the second falls away in Q2 2006. In evaluating the state of Chipotle's profitability, therefore, you're better advised to focus on the operating and/or gross results Monday. If those two continue to expand, it'll be time to smile.
Competitors:
- Outback Steakhouse (NYSE:OSI)
- Rubio's Restaurants (NASDAQ:RUBO)
- Yum! Brands (NYSE:YUM)
- Wendy's (NYSE:WEN)
- Mexican Restaurants (NASDAQ:CASA)
Fool contributor Rich Smith does not own shares of any company named above.
