Chipotle's Shares Soar On Q4 Earnings & Revenue Beat

Chipotle Mexican Grill, Inc. (CMG - Free Report) reported better-than-expected results in the fourth quarter of 2018. Adjusted earnings of $1.72 per share surpassed the Zacks Consensus Estimate of $1.39 by 23.7%. The bottom line also grew 28.4% from the year-ago quarter, backed by increased revenues and lower food costs.

Earnings beat, and a favorable top and bottom-line growth scenario must have encouraged investors as shares of Chipotle soared more than 10% in after-hour trading on Feb 6. In a year’s time, the stock has gained 97.8%, outperforming 17.5% rally recorded by the industry.

Chipotle’s increased focus on augmenting customer experience by introducing food-safety programs, various sales-building initiatives and greater digital innovation have resulted in revenue growth in the fourth quarter. Further, lower expenses aided margins in the quarter under review.


Revenues and Comparable Restaurant Sales

Quarterly revenues of $1.23 billion surpassed the consensus estimate of $1.19 billion by 3.4% and grew 10.4% year over year. The upside is primarily attributable to improvement in comps and restaurant openings. In the quarter under review, Chipotle opened 40 restaurants and closed or relocated 12, bringing the total restaurant count to 2,491.

Comps in the quarter under review rose 6.1%, driven by an increase in average check, including a 3.3% benefit from the menu price increase and a 2% rise in comparable restaurant transactions.

Costs, Operating Highlights & Net Income

Food, beverage and packaging costs, as a percentage of revenues, decreased 100 basis points (bps) to 33.2%, owing to the benefit of menu price increases and relief in avocado prices, partially offset by increase in freight expenses, and higher paper and packaging costs.

General and administrative expenses were 8.5% of total revenues, reflecting an increase of 330 bps year over year, primarily due to $15.1 million related to corporate restructuring and other unusual charges, $10.8 million related to higher costs associated with annual incentive cash bonus program (AIP), and $9.2 million in higher stock compensation due to a reversal of expenses taken in the fourth quarter of 2017 for performance-based stock awards.

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