Chipotle’s Q4 2022 Earnings Preview: Here’s what to expect

Chipotle Mexican Grill (CMG) is expected to report fourth quarter results after market close today.

Analysts are closely monitoring the impact of higher menu prices and pedestrian trends, particularly in relation to the limited-time release of the new garlic guajillo steak, in addition to digital and delivery sales.

Here’s what Wall Street expects from the California-based burrito chain:

• Revenue: $2.23 billion, up 13.9% year-on-year

• Adjusted earnings per share: $8.91 per share, up 62.9% year over year

• Same Store Sales: 7.04%

In its most recent quarter, Chipotle had $2.23 billion in revenue, up 13.9% year over year.

Citi, which has a buy rating and a price target of $1,986, believes expectations for this quarter are “muted” given the “company forecast for negative traffic.” Foot traffic fell by 10.2% in the fourth quarter compared to 2021, according to analytics firm Placer.ai.

Despite this, shares are up 22.5% year-to-date.

In his note to investors, Citi analyst Jon Tower wrote, “We get the simple bearish narrative (macro/overpriced = ongoing traffic issue).”

Goldman Sachs, with a similar view, said in a note: “Pricing power and demand elasticity have been key debates for CMG recently given the company’s aggressive price increases in 2021-22.”

In August 2022, Chipotle increased menu prices by 4%. That was the third time in 15 months.

A rise in labor costs and a rise in avocado prices (although they are now trending down) were the main reasons for higher menu prices.

A lack of excitement around the limited-time offer (LTO) could be partly responsible for the reduced foot traffic. Goldman Sachs said in a note that the “guajillo steak [was] not a good comparison to the hugely successful smoked brisket in 2021.” The company has a buy rating and a price target of $1,785.

However, Goldman analyst Jared Gerber is still bullish on the chances of LTO, which has historically driven traffic to his app. Garber said it’s one of the reasons the company is maintaining a bullish view with its “premium protein LTO strategy to generate buzz and drive loyalty, frequency, trials and traffic.”

In 2021 the limited time offer of incense smoked chest led to top app downloads. In fiscal 2022, app downloads per Goldman fell 8%, but engagement increased about 50% from 2021.

Delivery and transit are also priorities. Oppenheimer, which has a price target of $1,875 and an outperform rating, said its drive-thru concept, Chipotlanes, has not yet been fully appreciated by investors.

As for future prospects, UBS’s Dennis Geiger expects “better traffic this burrito season,” which Chipotle says is calling its peak season (March through May). The company has a buy rating and a price target of $1,800.

Previously, the burrito chain recently announced plans to hire 15,000 workers. This is a step in the company’s long-term goal of reaching 7,000 locations in North America, with plans to open up to 285 new restaurants in 2023, according to third-quarter results.

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Brooke DiPalma is a reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at [email protected]

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