Chipotle Mexican Grill Q3 Earnings Preview: Can Bill Ackman's No. 1 Holding Buck The Trend?

Restaurant chain Chipotle Mexican Grill CMG will report third-quarter earnings after market hours on Thursday. Here’s what analysts are watching and what Wall Street expects from the report, as well as the stock’s analysts ratings.

What CMG Analysts Would Be Closely Watching

From a business standpoint, Chipotle Mexican Grill sports healthy financial health. The company’s liquidity and profitability metrics are good, and the company’s cash position is also strong. The stock’s price appears to be ahead of its value. The stock is trading at an earnings multiple (P/E) of over 40, with the sector median at close to 13 P/E.

Analysts would be closely watching the impact of the company’s aggressive pricing on demand. The impact of the upcoming student loan repayments on demand from its target consumer would also be under close watch. Under observation would also be industry-wise traffic and commodity inflation trends that impact its business directly. Chipotle’s product pricing strategies have worked in its favor until now, helping it buck many general trends in the restaurant business. Analysts would be watching whether it can continue to do so.

The stock continues to shine as billionaire hedge fund manager, Bill Ackman‘s No. 1 holding in his Pershing Square Capital 13F portfolio. CMG makes up more than 18.8% of Pershing Square Capital Management’s portfolio. In effect, Pershing Square holds 3.4% of the company.

Related Link: Bill Ackman Warns Of A ‘Big Threat’ For Certain Americans – Here Are His Top 3 Holdings

Earnings Estimates: Wall Street analysts expect CMG to report $10.56 in EPS for the quarter and $2.47BN in revenue. We’ve seen mixed results from Chipotle over the past eight quarters. Over the past two years, CMG stock delivered four EPS beats and four revenue beats over the 8 that were reported.

Per consensus estimates of 30 analysts, Chipotle is expected to report $43.46 in EPS for the fiscal year ending December 2023 (representing a 32.57% year-on-year increase). Revenue estimates for the said period stand at $9.81BN currently (13.64% YoY growth).

Analyst Ratings & Price Targets: Wall Street analyst ratings (based on a pool of 120 analyst firms over the last 12 months) currently rate the stock Outperform. Consensus price target stands at $2,147.24 a share.

Price Action: CMG shares are trading at around $1,842/share, range bound between $$1,770 and $1,870 over the past month. The 52-week range is a low of $1,334.05 and a high of $2,175.01.