Chipotle spices things up for investors
With its latest earnings leaving expectations way behind, it's proving that Taco Bell isn't as big a threat as many said.
Net income at the restaurant chain known for its burritos surged 7.6% to $87.9 million, or $2.82 per share, versus $81.7 million, or $2.56 per share, a year earlier. Revenue soared, up 18.2% to $816.8 million, even as Chipotle faced higher commodity costs. Comparable-store sales, a key measure of sales at locations open at least a year, rose an astounding 5.5%.
The results were better than the $2.81 profit and the 3.8% same-store sales gain analysts predicted. Chipotle expects revenue from existing locations this year will rise in "the low- to mid-single-digit" percentages compared with its earlier forecast of "flat to low-single-digit" growth
Shares of Chipotle have generally moved up this year, but not without pressure as some on Wall Street argued that its growth prospects were limited and its stock overvalued, especially given the competition from Yum Brands' (YUM) Taco Bell. The rival chain posted U.S. same-store sales gain of 3% in the recent quarter, outperforming its Yum-owned brethren KFC and Pizza Hut.
Money manager Jeffrey Gundlach, CEO of DoubleLine Capital, was quoted by Bloomberg News in May urging investors to short Chipotle stock, or bet that its price will fall. Many investors seemed to agree with Gundlach. Still, shares of Chipotle are up about 0.7% over the past 52 weeks and nearly 37% year-to-date.
Chipotle trades at a price-to-earnings ratio around 42. That's pricey, but still below the shares' five-year high of 49.9. At Friday’s close of $408.51, the stock is trading well ahead of analysts' average 52-week price target of $384.63, so there's no rush to buy now.
Investors should wait for a pullback before moving into Chipotle. After all, if Wall Street underestimated the company once, it could do so again.
Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.
More on moneyNOW
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
[BRIEFING.COM] The major averages posted solid gains ahead of tomorrow's policy directive from the Federal Open Market Committee. The S&P 500 rallied 0.8%, while the Russell 2000 (+0.3%) could not keep pace with the benchmark index.
Equity indices hovered near their flat lines during the first two hours of action, but surged in reaction to reports from the Wall Street Journal concerning tomorrow's FOMC statement. Specifically, Fed watcher Jon Hilsenrath indicated that the statement ... More
More Market News
An interest rate tease in The Wall Street Journal sends the market into an optimistic tizzy -- but one that doesn't end quite at the top.
MUST-SEE ON MSN
- Video: Easy DIY smoked meats at home
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'