Chipotle (CMG) Q2 Results Preview: Will They Beat Expectations?

The company’s management team is positive and plans to expand on the domestic and international markets.

• Chipotle Mexican Grill will report financial results after the stock market opens on Wednesday.
• The company’s revenue and earnings per share exceeded estimates for the second consecutive quarter.
• Consensus estimates are calling for earnings of $0.32 per share on revenue of $2.94 billion for the quarter.

Chipotle Earnings Preview

In one of the largest stock splits in the history of the New York Stock Exchange (NYSE) Chipotle Mexican Grill CMG) recently completed a massive 50-1 split, with the new share price hitting trading platforms on June 26. The previous share price was above $2,500, making it difficult for small and mid-sized investors to participate in the popular fast-food chain. Now that the new share price has dropped to $53 per share, there will likely be a lot more activity surrounding the first earnings announcement after the stock split:

Chipotle opened the trading year at $45.57 and currently trades around $53 per share, up 17% for the year. Still, shares really took a nosedive after the split, falling from a recent high of $69.26.

Brian Niccol, president and CEO, added some color to the latest financial results: “We had another excellent quarter driven by our improved throughput and successful marketing initiatives, including braised beef barbecue and chicken al pastor, which drove strong sales and transactions. The results we are seeing from our focus on developing exceptional people, making great food and fast throughput give me confidence that we can achieve our long-term goal of more than doubling our business in North America and expanding internationally…”

In 2024, the company expects mid-to-high single-digit comparable restaurant sales growth and the opening of 285-315 restaurants, more than 80% of which will include a Chipotlane drive-thru.

From a trading and investing perspective, CMG stock typically has fairly high implied volatility. This is illustrated by the expected stock move ahead of this week’s earnings announcement based on current implied volatility.

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

Chipotle’s implied stock volatility reflects an expected move of +/- $10.24 over the full January 2025 cycle, so this week’s expected move represents 40% of the expected move by the end of the year.

Bullish on Chipotle’s earnings

Bullish investors are expecting earnings per share (EPS) and revenue to beat for the third consecutive quarter. Company executives have already expressed their plan for domestic and international expansion and continue to offer a positive outlook that could result in a bullish move on earnings if estimates are again beaten.

Bearish on Chipotle’s earnings

Investors who are pessimistic about Chipotle’s earnings are likely banking on an earnings miss and weakening guidance for the rest of the year. The stock has already seen a fair amount of selling off from its recent pre-earnings highs, and we can expect that to continue if earnings miss.

Tune in to Live Options Trading Concepts Tomorrow at 11:00 AM CDT, detailed preview of Chipotle’s profit strategy!

Mike Butler, tastylive Director of Market Intelligence, has been in the markets and trading for a decade. Appears in Live Options Trading Conceptsaired from Monday to Friday. @tradermikeyb

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