Is Chipotle Stock a Buy After Sales Surprise?

It hasn't been creaseless sailing for Chipotle Mexican Grill (NYSE: CMG) pursuing the departure of its highly regarded CEO successful the autumn of 2024, arsenic the fast-casual Tex-Mex edifice relation has struggled with comparable-store income maturation ever since. However, the institution gave investors immoderate bully quality erstwhile it reported its first-quarter (Q1) results -- a astonishment uptick successful same-store sales.

Let's dive into its quarterly results and prospects to spot if this could beryllium the commencement of a turnaround.

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A ray of hope

After seeing its same-store income descend by 2.5% successful the 4th quarter, the edifice relation turned successful a astonishment 0.5% summation successful Q1. Traffic accrued by 0.6%, portion the mean transaction edged 0.1% lower. The institution credited the betterment to the instrumentality of its limited-time Chicken al Pastor offering and the instauration of its caller Cilantro-Lime Sauce. It added that it has seen a bully measurement up successful April, helped by the Easter displacement and beardown momentum with its Cilantro-Lime Sauce.

Overall, Chipotle's gross roseate by 7.4% to $3.09 cardinal successful the quarter, portion its adjusted net per stock (EPS) slid 17% to $0.24. That was mostly successful enactment with analysts' expectations for EPS of $0.24 of income of $3.07 billion, according to LSEG.

Restaurant-level operating borderline fell by 250 ground points to 23.7%. This is 1 of the astir important metrics successful the edifice industry, arsenic it measures however profitable idiosyncratic restaurants are. The institution is feeling unit from accrued labour costs, precocious beef and freight costs, and accrued selling spending.

Chipotle continues to adhd caller locations, opening 49 company-owned restaurants successful the quarter. It plans to adhd betwixt 350 and 370 caller restaurants successful 2026, with betwixt 10 and 15 of them successful planetary markets with partners. It ended the 4th with 4,090 restaurants.

Despite the coagulated commencement to the year, Chipotle kept its forecast for same-store income to beryllium level for the year, fixed the existent uncertainties with the economy. It is looking for Q2 same-store income maturation of astir 1%, helped by the motorboat of its chromatic chicken.

Is the banal a buy?

Chipotle is showing immoderate signs of life, though the institution continues to instrumentality a blimpish presumption erstwhile it comes to guidance. And portion same-store income did borderline up, its restaurant-level borderline contraction is thing to watch. Often restaurants request to spot a definite level of same-store income maturation to support their margins, and the institution is inactive not astatine that point.