Investors in Chipotle Mexican Grill, Inc. (NYSE: CMG) have more reason to be optimistic about the future on Wednesday after the company reported a second consecutive quarter of positive results. With a new CEO in place and a business finally trending in the right direction, some analysts now see CMG stock as a worthwhile risk for long-term investors.
Chipotle reported first-quarter earnings per share of $2.13, topping consensus expectations of $1.57. First-quarter revenue of $1.1 billion came up just shy of consensus expectations of $1.15 billion.
Chipotle also reported same-store sales growth of 2.2 percent, up from 0.9 percent in the fourth quarter. Restaurant-level operating margin was 19.5 percent compared to 14.9 percent last quarter.
[See: 8 Ways to Satisfy a Craving for Restaurant Stocks.]
“While the company made notable progress during the quarter, I firmly believe we can accelerate that progress in the future” new CEO Brian Niccol says in a statement. “We are in the process of forming a path to greater performance in sales, transactions, margins and new restaurants.”
Investors have high hopes that Niccol, who took over as CEO of Chipotle in February, can repeat the success he had in his previous position as CEO of Taco Bell.
Looking ahead, Chipotle reiterated its previous guidance for full-year 2018 same-store sales growth in the low single digits. Chipotle also expects to open between 130 and 150 new restaurants this year.
Slumping sales and a public relations nightmare following a series of E. coli, salmonella and norovirus outbreaks starting in 2015 sent Chipotle stock tumbling from all-time highs above $750 to below $250 per share in February. However, two consecutive quarters of positive results and the addition Niccol has the stock trending back in the right direction, up 26.5 percent year-to-date.
Bernstein analyst Sara Senatore says investors may not be appreciating Chipotle’s long-term opportunity.
“Amidst market skepticism, we have maintained that there are significant opportunities to manage expenses, and recently announced waste management initiatives confirm our suspicions that expenses have been undermanaged,” Senatore says.
[See: Soft Drink Stocks Savor Success.]
Senatore said Chipotle’s executive compensation targets suggest the company could reach between $17 and $18 in annual EPS by 2020.
“Our saturation analysis suggests CMG can reach 3,800 stores over time, allowing for a decade of healthy growth,” Senatore said.
Bernstein has an “outperform” rating and $500 price target for CMG stock.
More from U.S. News
7 of the Best Stocks to Buy for 2018
11 Steps to Make a Million With Your 401k
The Top 10 Investment Portfolio for Millennials
Chipotle Mexican Grill, Inc. (CMG) Clears a Low Earnings Bar originally appeared on usnews.com
