Maxim Maintains Hold Rating On Chipotle Ahead Of Q3 Results

Analyst Stephen Anderson expects Chipotle Mexican Grill to report its 3Q15 EPS at $4.59, marginally missing the consensus expectations due to pork supply disruptions. The company’s same-restaurant sales likely have reached a trough in 3Q, and are expected to recover to mid-to-high single digit comp growth in 2016.

Justification

Recent checks revealed that although pork supplies remain disrupted in the Atlanta and Charlotte markets, they are likely to be restored to all U.S. restaurants in the next few weeks, Anderson added.

Related Link: OTR Global Downgrades Chipotle, Says Trends Soft

The analyst believes that Chipotle would benefit earlier than its peers from lower food costs, and that “the system-wide return of lower-cost pork to menus nationwide” would boost margin expansion.

Anderson added, however, that the company’s current share valuation already reflects the sales rebound expected from the return of pork and moderation of food costs in 2016.

“We estimate that, in addition to providing a comp lift of about 100 bps-200 bps to full-year 2016 same-restaurant sales, the return of pork provides a further boost of as much as $0.15-$0.20 to 2016E EPS in the form of lower food costs (relative to higher-cost beef),” the Maxim Group report stated.

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