* Reports on Wednesday, April 24, after market closure
* Expectation forecast: $ 1.26B
* EPS: $ 2.94
Chipotle Mexican Grill Inc from Denver (NYSE 🙂 has seen a spectacular turnaround last year. The shares have risen, bringing the restaurant chain close to the levels where they were trading in a number of its restaurants in 2015 before the first of several E. coli and norovirus outbreaks.
Having won 64% in the year so far, the Chipotle stock rose towards August 2015, a record high of $ 758.6, before dropping the past three sessions, to close at $ 688.21 yesterday. With the stock increase, it seems that customers have largely forgotten the outbreaks that had such a devastating effect on customer traffic and the turnover of the Mexican fast food giant in the following quarters.
Chipotle monthly chart
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When Chipotle announces its releases on Wednesday, April 24, investors will reassure that the company's conversion plan is well on its way and that it supports the upward trend in comparable revenue growth.
Stimulating developments
To dig a little deeper into CEO Brian Niccol's reversal strategy, we see some very encouraging developments helping the food chain at a time when the American restaurant industry is struggling to bring diners to their tables
First, he implements his digital initiatives very well and customers respond to them. In the fourth quarter, Chipotle showed a 66% increase in its digital sales from a year earlier, representing 13% of total sales during the period.
That company was able to make that meaningful switch to online channels by making a few simple changes to the store, such as adding second "make-lines" for assembling online ordered burritos and digital collection platforms. These smart moves dramatically improved the customer experience and stimulated online sales.
To continue building on his digital momentum, Chipotle is implementing this year's loyalty reward program at the national level, which has already garnered millions of members. The company started testing Chipotle Rewards in some markets last year, with promising results. It is also planning to add special pass-through lanes for picking up orders via the popular mobile app in some stores.
The other step that helped customers win back was Chipotle's renewal of its food processing practices, such as taking quarterly food safety training for employees and setting up a new food preparation system
The result of these positive developments is that analysts are rapidly changing their revenue expectations for the restaurant giant. According to analysts' average estimates, Chipotle is likely to achieve 24% average annual profitability growth over the next five years, a sharp recovery over the past five years, when growth dropped to a negative 17% per year
In the quarter that ended in March, earnings are likely to increase to $ 2.94 per share, an increase from $ 2.13 a year ago, while revenue is expected to increase by around 10% to $ 1.26 billion, according to analysts' average estimates.
Bottom Line
Even after such a robust comeback, we do not believe that the Chipotle shares have taken their course, as some analysts think. We believe that the shares will continue to benefit from the company's turn-around process and the leadership qualities of its CEO Brian Niccol.
He was a powerful player in striving to regain customer confidence and bring operational discipline back to a company that was on the verge of disaster just three years ago. The income statement from the restaurant chain next week is likely to support our bullish view.
