Chipotle (CMG) reported second-quarter earnings this past Tuesday evening. The company posted 60 cents per share on revenue of $274.3 million.
Analysts were expecting the company to announce 45 cents per share on $262.9 million in revenue. The company reported 33 cents per share in the same period last year.
The most amazing part of Chipotle's second-quarter was that the company was able to expand its restaurant-level operating margins from 21.7 to 23.2%. The company was able to do this because of price increases, labor efficiency, and improved controls. Interestingly, many of Chipotle's main competitors have missed their earnings recently because of decreasing margins.
The food industry as a whole has had a difficult time of late because of rising gas prices, which have made food ingredients far more pricy. Panera Bread, Wendy's, and PF Chang's have all warned their sales would miss estimates because of this problem. Chipotle did say that rising food production and transportation costs ate into their margin expansion somewhat, but the fact that the company is so strong during such a difficult time is quite astonishing.
When looking at analysts estimates, we do see that CMG trades at over 70 times last year's earnings, so this is no cheap stock. You have to understand what you are getting if you buy CMG. You are getting a fast growth stock which is trading at a very high multiple. If Chipotle continues posting numbers such as these, the high multiple won't look so high anymore, but if it slips anywhere it will be in for a huge fall.
Comment Preview