Chipotle Mexican Grill
Third-quarter comparable restaurant sales will be in the low single digits, at least according to the data to date. Third-quarter earnings will come in below last year's third quarter, because of the pretty obvious double whammy of the weak economy and rising food costs.
When Chipotle reports quarterly results in October, it will reveal pricing plans that it's working on for the fourth quarter, which are intended to offset increasing food prices. It will also reveal exactly how much lower the earnings will be compared to last year. The element of uncertainty here isn't exactly appetizing, even if it was garnished with some spicy salsa.
Other restaurant stocks that might be in danger of similar "whoops-it's-worse-than-we-thought" developments are in focus, too. Panera
Ever since February, I have viewed significant decreases in Chipotle's stock price (here and here) as opportunities, but obviously, I have been way too early. On the other hand, it looks like the stock was indeed overstuffed with optimism last fall.
I still believe Chipotle is a great company and stock, with awesome innovative strategies that remind me more of Starbucks
That's still the case, but today's burrito is stuffed with the mystery meat of uncertainty, unfortunately, and rash moves seem to me a mistake. The company has reached much more reasonable valuations since the beginning of the year, but given the bland third quarter that management is expecting, I'd wait to see investors' reactions before picking up shares.
Panera Bread is a Motley Fool Hidden Gems Pay Dirt selection. Chipotle Mexican Grill and Buffalo Wild Wings are Motley Fool Hidden Gems recommendations. Starbucks is a Motley Fool Inside Value selection. Chipotle Mexican Grill is a Motley Fool Rule Breakers pick. Whole Foods Market and Starbucks are Motley Fool Stock Advisor selections. The Fool owns shares of Starbucks and Buffalo Wild Wings. Try any of our Foolish newsletters today, free for 30 days.