Citi: Chipotle's Earnings Highlight The Company's Success

Citi issued a company update on Chipotle Mexican Grill, Inc. (NYSE: CMG) after the company reported Q1 2015 earnings. Citi rates Chipotle as a Buy and lowered their price target from $782 to $766.

Analysts Gregory Badishkanian and Catherine Lee wrote, "CMG has been posting strong results and has strong unit economics, decent FCF,and decent long-term store unit growth opportunities. We expect 2014 same store sales (SSS) should be in the mid-single-digit range. The company has solid ROIC of 23 percent, and longer term, we forecast 20 percent EPS growth. Despite a high forward P/E multiple, we do not yet believe these superior metrics and long-term growth prospects are factored into the stock price and therefore rate the shares Buy."

Chipotle's management believes that weather played a significant role in the lower than expected same-store sales growth as the company was unable to serve pork carnitas at its restaurants. The company made a significant move by discontinuing relations with one of its main pork suppliers due to the bad treatment their pigs were receiving.

Chipotle's management also discusses the likelihood of increasing prices on its steak and barbacoa offerings by as much as 6 percent. Citi believes that due to strong demand for Chipotle and the volume of traffic in their restaurants, the price increases are unlikely to be met with a lot of consumer opposition.