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A month has gone by since the last earnings report for Chipotle Mexican Grill (CMG). Shares have lost about 6.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Chipotle due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Chipotle Q4 Earnings Top Estimates, Revenues Lag
Chipotle posted fourth-quarter 2024 results, with earnings beating the Zacks Consensus Estimate and revenues missing the same. The top and bottom lines increased on a year-over-year basis.
The company remains cautious of higher costs of raw materials (including avocados) and potential tariffs on Mexican imports. If the recently announced tariffs go into full effect, they could impose an ongoing impact of about 60 basis points on the company's cost of sales, potentially adding further margin pressures.
Chipotle’s Q4 Earnings & Revenue Discussion
In the quarter under review, Chipotle reported adjusted earnings per share (EPS) of 25 cents, outpacing the Zacks Consensus Estimate of 24 cents. The bottom line increased 19% from 21 cents reported in the year-ago quarter.
Quarterly revenues of $2.8 billion missed the consensus mark by 0.2%. However, the top line rose 13.1% on a year-over-year basis. This upside was driven by new restaurant openings and strong comparable restaurant sales growth.
Comparable restaurant sales in the fourth quarter rose 5.4% compared with 6% growth in the previous quarter. During the quarter, comps were backed by higher transactions of 4% as well as a 1.4% rise in average checks.
During the fourth quarter, digital sales contributed 34.4% to total food and beverage revenues.
Chipotle’s Restaurant Openings
Strength in new restaurant openings aided the company’s performance in the fourth quarter. In the reported quarter, Chipotle opened 119 new restaurants in 95 locations, including a Chipotlane. It also opened an internationally licensed restaurant.
Chipotle’s Costs, Operating Highlights & Net Income
In the fourth quarter of 2024, food, beverage and packaging costs, as a percentage of revenues, came in at 30.4% compared with 29.7% reported in the prior-year quarter. The rise in costs was driven by inflationary costs across avocados and dairy and increased ingredient usage (aimed at delivering consistent, generous portions). Additionally, a shift in protein mix, spurred by the popularity of the Smoked Brisket limited-time offering, contributed to the cost uptick. This was partly offset by the positive impact of menu price hikes.
In the quarter under discussion, the restaurant-level operating margin reached 24.8%, down from 25.4% reported in the prior-year period.
Adjusted net income in the reported quarter amounted to $340 million, up 18.8% year over year.