Chipotle Earnings Preview: Over 7% Stock Move Expected

Company executives offer positive sentiment and plan to expand domestically and internationally

• Chipotle Mexican Grill will report earnings after the market opens Wednesday.
• The company’s has exceeded revenue and earnings-per-share estimates two quarters in a row.
• This quarter, the consensus estimate call for earnings per share of $0.32 on $2.94 billion in revenue.

Chipotle Earnings Preview

In one of the biggest stock splits in the history of the New York Stock Exchange (NYSE), Chipotle Mexican Grill CMG) recently executed a whopping 50-1 split with the new share price hitting trading platforms June 26. The old stock price exceeded $2,500, which made it hard for small and medium-sized investors to participate in the popular fast-food chain. Now, with a new stock price that has fallen to $53 per share, there will likely be much more activity around the first earnings announcement after the stock split:

Chipotle opened the trading year at $45.57, and currently sits around $53 per share for an increase of 17% on the year. With that said, the stock has really taken a nose-dive after the split, falling from a recent high of $69.26.

Brian Niccol, chairman and CEO, added some color to the recent earnings results: “We had another outstanding quarter driven by our improvement in throughput and successful marketing initiatives, including braised beef barbacoa and chicken al pastor, which drove strong sales and transactions. The results we are seeing from our focus on developing exceptional people, preparing delicious food and fast throughput gives me confidence that we can achieve our long-term target of more than doubling our business in North America and expanding internationally ..."

In 2024, the company expects mid-high single-digit percentage sales growth for comparable restaurants, and an expansion of 285-315 restaurant openings with over 80% including a Chipotlane drive-thru lane.

From a trading and investing perspective, CMG stock typically has pretty high implied volatility. This is exemplified in the stock's expected move for this week's earnings announcement based on current implied volatility.

The market anticipates a stock price range of +/- $4.14 this week in CMG, which is over 7% of the current stock price of $53. This expected move is in the mid-to-high range, with many earnings reports falling between 5%-10% of the stock price when you examine the weekly expected move.

The implied volatility of Chipotle reflects an expected move of +/- $10.24 through the January 2025 cycle, so the expected move this week is 40% of the expected move through the end of the year.

Bullish on Chipotle for earnings

Bullish investors are looking for an earnings-per-share (EPS) and revenue beat for the third quarter in a row. Company executives have already expressed their plan to expand domestically and internationally, and continued to offer positive sentiment that may result in a bullish move after earnings if estimates are exceeded yet again.

Bearish on Chipotle for earnings

Investors who are bearish on Chipotle for earnings are likely banking on an earnings miss, and weakened guidance for the rest of the year. The stock has already seen a pretty large selloff from recent highs ahead of earnings, and we could see that continue if there is an earnings miss.

Tune in to Options Trading Concepts Live tomorrow at 11 a.m. CDT for an in-depth earnings strategy preview for Chipotle!

Mike Butler, tastylive director of market intelligence, has been in the markets and trading for a decade. He appears on Options Trading Concepts Live, airing Monday-Friday. @tradermikeyb  

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