More than two years after sickness outbreaks sunk Chipotle Mexican Grill Inc.’s buyer visitors and share price, the firm is displaying indicators of a turnaround owed to a new chief government and price hikes, analysts say.
reported a 7.four% income enhance to $1.15 billion, a 2.2% same-store gross sales enhance and earnings of $2.13 per share, up greater than 33% year-over-year.
Shares are up 23.9% in Thursday buying and selling.
The firm was upgraded at Cowen after the outcomes. Analysts moved the shares to market carry out from underperform, and the price goal was raised to $350 from $275.
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“Chipotle is in the early stages of a turnaround, led by a credible CEO with ample low-hanging fruit including marketing, digital, and menu innovation,” Cowen wrote. “We ultimately see opportunities to upgrade menu ingredients as proprietary survey data indicates near trough-level food quality perceptions.”
Chipotle named former Taco Bell chief Brian Niccol as its new CEO in February, and shares rallied instantly. The first-quarter earnings announcement was his first for Chipotle. Taco Bell is a part of Yum Brands Inc.
Niccol outlined focus areas for the firm’s continued progress, together with elevated model relevance, however stated he’ll go into additional element on a name deliberate to happen earlier than the subsequent earnings announcement.
Despite few particulars, Cowen thinks the plan will embody “improved marketing and menu innovation.”
The final huge menu innovation push at Chipotle was round the launch of queso, which suffered in social media opinions.
SunTrust Robinson Humphrey analysts suppose the upcoming name will probably be a catalyst for Chipotle inventory and “enthusiasm will grow as his turnaround plans are unveiled.”
“We expect specific targets for digital sales (+20% Y/Y to 8.8% of sales in 1Q, + vs. 8.6% in 4Q17), new product initiatives (potentially connected to extended operating hours) and new marketing creative (Mr. Niccol considers increased visibility with consumers a key opportunity),” analysts wrote. “We also expect the announcement of store closures (less than 100 are cash flow negative), but do not expect any structural changes, such as refranchising (Mr. Niccol does not believe it’s an opportunity) or optimizing the balance sheet (as least at this early stage, in our view).”
SunTrust charges Chipotle shares purchase and raised the price goal to $410 from $380.
Stifel analysts are extra reserved.
“Given the traffic declines and the cause of the EPS upside, we do not believe 1Q results indicate the company is on a road to recovery, but we were encouraged by the CEO’s remarks about making the brand more accessible and top-of-mind with consumers,” analysts wrote.
Chipotle raised costs round 5%, spurring an increase in common examine and same-store gross sales.
Stifel analysts maintained their maintain inventory ranking, however raised the price goal to $325 from $275.
Raymond James analysts are additionally bearish, regardless of Niccol’s historical past with Taco Bell.
“We acknowledge that Niccol’s track record of success at Taco Bell combined with various opportunities for improvement at Chipotle… have the potential to drive improved results in 2019 and beyond,” wrote analysts led by Brian Vaccaro. “That said, we do not believe there is a quick/easy fix to reaccelerate comps given current sales per square foot and absolute traffic levels are well above industry peers and intense industry competition.”
Raymond James charges Chipotle inventory market carry out.
Still, there’s confidence that Niccol will handle the firm’s largest issues.
“Talk of restructuring to support the new strategy as well as reiteration of unit growth alleviates two of the most significant concerns around margins and topline growth,” wrote Bernstein analysts, who price Chipotle inventory outperform.
Chipotle shares are up 43.2% for the 12 months thus far, outpacing the S&P 500 index
, which is down zero.5% for the interval.