Chipotle earnings preview: digital menu exclusives could drive sales

Chipotle Mexican Grill Inc. may launch digital-only menu items that drive sales, according to UBS analysts.

Chipotle CMG,
+ 2.42%
Digital sales increased 81% in the first quarter. The company has focused on improving its online business, such as installing Chipotlanes that enable rapid digital order picking, despite the coronavirus pandemic. Chipotle announced last week that it is hiring 10,000 workers to manage the new digital business.

The company also continued efforts to improve its menu, starting a trial of cauliflower rice last week at 55 restaurants.

“We also anticipate the launch of digital-only menu items, including quesadillas, which offer the potential for incremental gains and ultimately a broader launch beyond digital,” wrote analysts led by Dennis Geiger. “We hope that proteins, beverages and other potential add-ons can provide traffic and check for tailwinds.”

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Ultimately, UBS believes that Chipotle will emerge from the coronavirus pandemic in a better position than when it entered, “with possible market share gains, greater real estate opportunities, and potential margin benefits.”

UBS rates Chipotle shares neutral with a price target of $ 1,200, above $ 850.

Optimistic analysts have raised their price targets on Chipotle stocks ahead of the informal chain’s earnings announcement for the second quarter.

SunTrust Robinson Humphrey moved its target price to $ 1,336 from $ 946. Analysts say digital sales in Chipotle rose to 70% of total sales the week of April 19, and the company has made improvements to its app, added GrubHub. Inc. GRUB,
as a third-party delivery provider and made other advances. And the company will benefit from the reopening of restaurants and the launch of new restaurants.

“In the face of the COVID crisis, Chipotle has indicated increasing demand from developers, high-quality site deals being abandoned by competitors, greater flexibility on the part of owners to accommodate ‘Chipotlanes’ and strong human capital for the store staff, “analysts said.

SunTrust rates the purchase of Chipotle shares.

Too:Online food prices rise as food companies struggle to meet demand

Here are some other things to keep in mind when Chipotle reports:

Profits: FactSet is targeting earnings per share of 35 cents, down from $ 3.99 per share last year.

Estimate, which crowdsources estimates from buy-side and buy-side analysts, hedge fund managers, executives, academics, and others, is forecasting 33 cents a share.

Chipotle has outperformed the FactSet earnings consensus for the past 10 quarters.

Income: The FactSet and Estimize prospects are for revenue of $ 1.33 billion, down from $ 1.43 billion last year.

Chipotle has exceeded FactSet’s revenue consensus in five of the last six quarters.

Market price: Chipotle shares have risen 39% by 2020 so far, and have grown nearly 44% in the past three months.

The S&P 500 SPX Index,
+ 0.84%
It has increased 0.7% for the year to date.

AND:Red Robin Gourmet Burgers cut 55 menu items due to coronavirus and not planning to bring them back

Other elements:

-Chipotle has something in common with fast-service restaurants like McDonald’s Corp. MCD,
+ 0.06%
KeyBanc Capital Markets says.

“Like traditional fast-food chains, Chipotle is likely benefiting from an abnormal competitive environment that has seen fewer discounts, limited competition, reduced marketing investment and aggressive government stimulus,” analysts said.

KeyBanc rates Chipotle’s overweight stock with a price target of $ 1,250, up from $ 1,125.

– Quo Vadis analysts believe Chipotle’s earnings are about to skyrocket.

“As we review the consensus forecast, it seems reasonable to believe that offsets could return to growth in the fourth quarter and that the company could generate EPS in the neighborhood of $ 19 in 2021,” wrote John Zolidis, president of Quo Vadis.

The FactSet consensus is for EPS 2021 of $ 19.52.

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Chipotle’s Rewards membership has increased during the pandemic. SunTrust says that Chipotle had between 12 and 13 million members in mid-June, compared to about 11.5 million members in April.