Raymond James’ Brian M. Vaccaro believes that the lost sales being witnessed by Chipotle Mexican Grill, Inc.
Vaccaro downgraded the rating on the company from Market Perform to Underperform.
“New Normal” For Sales?
The analyst mentioned that sales were still down 15-20 percent after nearly 12 months of the initial E.coli incident.
“We suspect the remaining sales decline reflects a more permanent change in frequency/loyalty among some consumers (from unusually high levels prior to the incident) rather than elevated food safety concerns,” Vaccaro stated.
The analyst believes that if this is the “new normal” for Chipotle’s sales, the company’s financial model would still remain among the strongest in Raymond James’ coverage universe.
However, the risk/reward from the current valuation levels appears more skewed to the negative.
Chipotle is scheduled to report its Q3 2016 results after market close on October 25. Vaccaro expects the company to report its EPS at $1.65, below the consensus forecast, and reflecting a comp decline of 18 percent.
“Our model assumes total revenue declines ~11 percent y/y to $1.09 billion and that store level margins decline nearly 1,000 bp on sales deleverage and elevated advertising/promo costs,” the analyst said.
The 2016 EPS estimate has been lowered to reflect more conservative comp and margin expectations for H2.
|Oct 2016||RBC Capital||Maintains||Outperform|
|Oct 2016||Raymond James||Downgrades||Market Perform||Underperform|
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