Chipotle Mexican Grill: Going Up?

Janney’s Mark Kalinowski lowered his second quarter estimate for Chipotle Mexican Grill (CMG) but sees good times ahead. He explains why:

Associated Press

We raise our 2014 and 2015 EPS estimates for Chipotle Mexican Grill (CMG; Buy), although we lower our Q2 2014 EPS estimate ahead of Monday afternoon's scheduled release as we believe our prior G&A expense estimate for that quarter was too low. Our full-year 2014 EPS forecast rises by 39 cents, to $12.68; our full-year 2015 EPS projection goes up by 90 cents, to $16.15. Looking at 2014 quarterly EPS estimates, our Q2 EPS forecast goes down by -20 cents, to $3.10, but our Q3 and Q4 EPS projections rise by 25 cents and 35 cents, to $3.50 and $3.45, respectively. The main reasons for our EPS estimate increases for the back half of 2014 are ongoing same-store sales momentum, which we believe remains some of the very best to be found in the restaurant industry (and helped by recently-implemented menu price hikes, which should provide margin relief in the second half of 2014 and extending into the first half of 2015). Our fair value estimate rises to $700. We maintain our Buy rating…

The main risk for Chipotle, Kalinowski says, is “a relatively high valuation compared to most other restaurant stocks we cover.” Chipotle trades at 36.73 times forward earnings, while Starbucks (SBUX) trades at 24.7 times, Panera Bread (PNRA) trades at 19.1 times and McDonald’s (MCD) trades at 15.8 times.

Shares of Chipotle Mexican Grill have gained 1.9% to $592.67 at 2:41 p.m., while Starbucks has risen 1% to $78.04, Panera Bread has advanced 1.3% to $146.48 and McDonald’s is up 0.7% at $99.01.