Chipotle Mexican Grill (NYSE:CMG) continued its blistering growth, as fourth quarter net income grew 47% on the strength of a 12.6% increase in same-store sales. The company said that despite rising input costs, it plans to hold the line on prices this year. The market sent the stock up more than 5% on the report.
IN PICTURES: 9 Ways To Trim The Fat From Your Spending
Growth Story Continues
Chipotle's excellent management continues to grow its earnings even faster than its fast-growing revenue, as it increases traffic and expands its number of restaurants. Chipotle pushed its operating margins up 140 basis points to 25.9% in the year-over-year quarter, and 180 basis points to 26.7% for the full year 2010 versus 2009. Although the company expects inflation for its beef and chicken ingredients to rise into the mid-single digits in 2011, it doesn't plan on initially passing these costs through to the consumer.
There are a slew of chains along with Chipotle which operate beyond the burger model. Specialty sandwich restaurant Panera Bread (Nasdaq:PNRA) also turned in great fourth quarter earnings, with net income up 21.7%, revenue up 16.7% and same store sales up 5.2%. BJ's Restaurants (Nasdaq:BJRI) quadrupled its earnings, while Cheesecake Factory (Nasdaq:CAKE), though profitable, was hampered by poor weather. California Pizza Kitchen (Nasdaq:CPKI) also turned profitable after a loss in last year's same quarter.
As for Chipotle, one could argue Yum! Brands (NYSE:YUM) with Taco Bell paved the way for the wide cultural acceptance of burritos, a slipstream which Chipotle is riding to maximum advantage for its stunning success.
Turning Burritos into Cash
Chipotle's fourth quarter revenue rose 24.5%, and net income was $46.4 million or $1.47 per share, versus $31.6 million net income or 99 cents a share in the year ago quarter. Chipotle opened 62 new restaurants, with company plans to open 135-145 new restaurants in 2011. For the full year 2010, net income rose to $178.98 million or $5.64 a share, compared to $126.84 million or $3.95 a share, on revenue of $1.836 billion, up from $1.518 billion in 2009. Same store sales for the year increased 9%. These numbers read like a baseball superstar's stats - they're all great.
There are a couple of other numbers to watch, however. The first will be food input costs. This was 31% of revenue in the fourth quarter, a slight rise from 30.1% in the previous year's quarter. Food inflation may end up making a larger impact on Chipotle than the company assumes.
Another number to watch is Chipotle's share price, which touched its 52-week high of $275. Investors might also want to look at the PE. Chipotle trades at a current PE just under 50 and a forward PE of 33, so investors are paying up for that impressive growth. Chipotle's a fast-food superstar right now, but the stiff premium in its stock price leaves an increasingly smaller margin of safety. (To learn more, see Sinking Your Teeth Into Restaurant Stocks.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!