Ripping Through Estimates

Chipotle Mexican Grill - CMG - Reported earnings earlier today and ripped through estimates. It sold off slightly after hours because essentially, people panic. One of the main concerns I hear is that growth will slow in the back half of the year. Wow, so that's news? You could have listened to them say the exact same thing on the last call. Kind of reminds me of this stock Google, which had the same sort of dynamic play out where people thought the world was going to end. Its not going to happen. Right now estimates stand at $0.23 per share on $203.4 million in revenue for Q3. I ran through some rough estimates as I am somewhat pressed for time, and in Q3 the revenue estimate calls for roughly a 7.5% comp out of Chipotle. Now this is up to your interpretation, but in my humble opinion the comp will be better than that. All we can hope for now is that Wall Street's finest don't figure that out and leave estimates as is, so CMG can beat. That scenario is highly unlikely, but it would be great to see. Assuming a 9.0% comp they would be pushing $207 million in revenue, which would make for a nice beat assuming estimates hold steady. Now this information is not complete as I haven't listened to the call yet so I'm not quite sure on the EPS line and the revenue estimate is rough, but it gives you an idea of where I'm coming from.

As for the quarter, margins up - costs down. Simply put it was a very good quarter. Sure, not quite what some were expecting, but then again you have to understand its a restaurant in a weak consumer market. What do you expect? I still haven't decided on my entry point, but it is on my shopping list. I will post a more complete review when I get some free time.

I am starting my preliminary research on VMI tonight.

Earnings season seems to keep me too busy to stay on top of everything ,so I apologize for the brief CMG summary, I will run through the key elements of it all later.

If it is down only a few percent tomorrow, that should be a very good sign. If its up you may need to be a buyer...

One last point of risk. There shouldn't be any issue with this, but when McDonald's dumps their shares of CMG in October, it could pressure the stock.