Chipotle Mexican Grill, Inc. (NYSE: CMG) investors are hoping this is finally the year the struggling restaurant gets back on track following a string of food safety outbreaks back in 2015.
Investors will once again be watching closely for signs of the elusive turnaround when the company reports fourth-quarter earnings on Feb. 6, but analysts aren’t particularly optimistic.
Analysts are expecting Chipotle to report earnings per share of $1.33 on revenue of $1.12 billion in the fourth quarter. Those consensus estimates represent 141.8 and 8.7 percent growth, respectively.
More than two years after Chipotle’s revenue was rocked by E. coli outbreaks, it has yet to recover to its peak mid-2015 levels. Chipotle’s stock price remains down 55.9 percent from where it was three years ago, and new evidence out last week suggest Chipotlehasn’t made much progress in restoring its brand perception.
According to a new report by UBS, Chipotle’s online review scores have consistently deteriorated since 2015. More than a third (36 percent) of the Chipotle customers UBS surveyed said they currently eat at Chipotle less than they have in the past due to concerns about food safety. An additional 22 percent of customers said they prefer to eat elsewhere because of Chipotle’s prices.
“Despite aggressive efforts to improve brand perceptions through a new national advertising campaign and the launch of new products including queso recently, customer review scores have not shown any signs of improvement,” UBS analyst Dennis Geiger says in a downgrade note. “Chipotle’s brand perceptions remain challenged and headline risk from potential future incidents remains elevated.”
UBS found that McDonald’s Corp. (MCD) and Yum Brands (YUM) subsidiary Taco Bell are the two most popular alternates to Chipotle among respondents.
After Chipotle reported 1 percent same-store sales growth in the most recent quarter, Bank of America analyst Gregory Francfort says Wall Street’s earnings expectations for Chipotle in 2018 and 2019 are still too high.
“The company continues to trade at an expensive level on aggressive street earnings consensus, and therefore we see risk to the stock going forward,” Francfort says.
Bank of America has…
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