Oppenheimer analyst Brian Bittner reiterated an Outperform rating on Chipotle Mexican Grill, Inc.
The company plans to issue its second-quarter results on July 26, 2023.
Following a thorough analysis, the analyst remains upbeat about CMG's risk/reward and still identifies a compelling case for SSS, margin, and EPS upside through 2024.
The analyst adds that the bullish stance is further supported by accelerating unit growth (to 8-10% range) through high-return "Chipotlanes" funded with solid cash flow and a debt-free balance sheet.
Bittner sees optionality for +double-digit revisions to 2023 consensus EPS of $44.35.
Bittner believes the CMG model holds tools to grow EPS by at least 20% annually, leading to a path to $100 EPS by 2027. This is underpinned by assuming ~10% unit growth, low-to-mid-single-digit SSS and modest (60-90bps) EBIT margin expansion.
From a sensitivity standpoint, every 100bps change in SSS drives annual EPS $1.00+ (2.5%+), and every 100bps change in restaurant margins impacts EPS by $2.75 (6%), notes the analyst.
For 2Q23, the analyst models an all-around beat, with 7.5% SSS (vs. Street's 7.4%), 27.3% restaurant margins (vs. 27.1%), and $12.40 EPS (vs. $12.18).
Bittner also raised 2023E/2024E EPS to $45.39/$54.87 above the previous estimates of $44.03/$53.38.
Going ahead, the analyst remains upbeat about the roll-out of clamshell grills and "Hyphen" automation tools, which are expected to provide the company with a multi-year SSS tailwind after FY23.
This is because Clamshell grills reduce chicken cook times to 2-3 minutes from 12-13 minutes, and the automated Hyphen technology could be a throughput game-changer over time, the analyst adds.
Price Action: CMG shares are trading higher by 2.72% to $2,111.99 on the last check Monday.
