What Happened

Chipotle reported revenue basically in line with expectations and an adjusted earnings beat when restructuring and legal costs were taken out. The big news was comparable-store sales, key for any retailer, which rose 13.4% versus an expected 9.3%. The stock fluctuated in after-hours trading.

(Below is Investopedia's original earnings preview, published 1-27-20)

What to Look for

Chipotle Mexican Grill (CMG) has posted impressive results in the past year, beating analysts’ earnings forecasts in each of the last four quarters on robust revenue growth. Investors will be watching to see if Chipotle can put up big numbers again when it reports earnings on February 4, 2020 for Q4 2019.  A key indicator investors will be focusing on is Chipotle’s same-store-sales growth, which is expected to rise along with both earnings and revenue in Q4 compared to the same quarter a year ago. 

These improvements are a sign that Chipotle has largely recovered from a series of food poisoning scandals from 2015 to 2018 that hurt the company's reputation and results. Shares of Chipotle have posted a total return of 60% over the past 12 months compared to the S&P 500's total return of just under 24%.

One Year Total Return for S&P 500 and Chipotle
Source: TradingView.

Despite beating earnings estimates, there has been no clear correlation between the company's earnings beats and the direction in which Chipotle's stock has moved following its quarterly reports. The restaurant chain's stock fell following the earnings reports for Q3 and Q1, but jumped following its Q2 report as well after the Q4 2018 announcement.

Chipotle posted Q3 2019 earnings per share (EPS) of $3.47, 154.7% higher than the same quarter a year ago. That pace of growth was the highest quarterly year-over-year (YOY) growth the company has exhibited since the final quarter of 2017. Revenue for Q3 grew at a pace of 14.6% YOY, the fastest quarterly pace going all the way back to Q2 2017. While earnings and revenue growth is expected to slow slightly in Q4, it still would remain very strong, with EPS jumping by 135.8% on a 14.2% revenue increase.

Chipotle Key Metrics
  Estimate for Q4 2019 (FY) Actual for Q4 2018 (FY) Actual for Q4 2017 (FY)
Earnings Per Share ($) 2.70 1.15 1.55
Revenue ($B) 1.4 1.2 1.1
Same Store Sales Growth YOY (%) 9.3 6.1 0.9

Source: Visible Alpha

A key metric that investors will be interested is Chipotle's same-store-sales growth. Same-store sales, or comparable-store sales, is a key financial metric for restaurants and retail companies. It provides a measure of the total sales attributable to stores that have been in operation for a year or longer, or in Chipotle's case, stores in operation for at least 13 full calendar months.

Chipotle posted YOY same-store-sales growth of 11.0% for Q3 2019, the seventh consecutive quarter of accelerating growth. Analysts expect same store sales to rise by a still strong 9.3% in 4Q, at least 3 percentage points higher than it was in the same quarter a year ago.  Nonetheless, that estimated Q4 growth in same store sales would be the slowest of any quarter in 2019. Investors are likely to watch closely to see whether this slowdown is a short-term trend, or if Q4 marks a turning point where same-store-sales growth continues to decelerate.