Chipotle Gears Up to Post Q1 Earnings: Buy, Sell or Hold the Stock?

Chipotle Mexican Grill, Inc. CMG is scheduled to report its first-quarter 2025 results after the closing bell on April 23, 2025.

In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate by 4.2%. CMG has an impressive record of surpassing earnings expectations. It has exceeded the consensus mark in the trailing four quarters, the average surprise being 9.2%, as shown in the chart below.

CMG’s Earnings Surprise History

Trend in Chipotle’s Estimate Revision

The Zacks Consensus Estimate for first-quarter earnings is pegged at 28 cents per share, indicating an improvement of 3.7% from the 27 cents reported in the year-ago quarter. The consensus estimate has been unchanged in the past 30 days. Other industry players like McDonald's Corporation MCD, CAVA Group, Inc. CAVA and Yum! Brands, Inc.’s YUM earnings in the quarter-to-be-reported are likely to increase 4.4%, 31% and 9.1% year over year, respectively.

For quarterly revenues, the consensus mark is pegged at $2.93 billion, suggesting an increase of 8.5% from the year-ago quarter’s reported figure.

What Our Model Unveils for CMG

Our proven model does not conclusively predict an earnings beat for Chipotle this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.

Earnings ESP: Chipotle has an Earnings ESP of -1.80%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: The company carries a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Factors Shaping Chipotle’s Q1 Performance

CMG's first-quarter 2025 performance is likely to have been aided by strong digitalization, expansion efforts and the debut of Chipotle Honey Chicken in early March. The company’s investment in technology and innovation is likely to have bolstered its operations.

With digital orders accounting for more than a third of its sales, the company’s mobile app and “Chipotlane” drive-thru pickup windows are creating faster, more convenient ways for customers to engage with the brand. These enhancements continue to increase average check sizes but also boost efficiency, contributing to stronger unit economics.

Digitization has also enhanced Chipotle’s delivery system. Partnerships with Uber Eats and Grubhub are attracting customers. The company has also expanded its digital capabilities into Canada. Collaboration with major third-party delivery aggregators has increased orders.

Our model predicts first-quarter food and beverage revenues to increase 8.4% year over year to $2.9 billion. Delivery service revenues are expected to be $17.2 million, suggesting a year-over-year decrease of 1.2%.

Higher transactions, increased average checks and restaurant openings are likely to have driven comps growth in the to-be-reported quarter. Our model predicts year-over-year comps growth of 2.9% for the first quarter.

However, high costs and inclement weather are likely to have negatively impacted the company’s performance. Our model predicts food, beverage and packaging costs to be $869 million, suggesting an 11.5% year-over-year rise. Per the model, labor costs are expected to increase 9.7% to $723.5 million. Our model predicts a restaurant-level margin of 26.3%. In first-quarter 2024, the company reported a restaurant-level margin of 27.5%.

Price Performance & Valuation

Shares of Chipotle declined 16.5% in the past year against the Zacks Retail – Restaurants industry’s 0.8% growth. CMG has underperformed other industry players like McDonald's, CAVA and Yum! Brands.

CMG’s Price Performance

From a valuation perspective, Chipotle’s stock is trading at a premium. The company has a forward 12-month price-to-sales of 5.02X, significantly above the industry average. Other industry players like McDonald's, CAVA and Yum! Brands are trading at 8.28X, 7.82X and 4.79X, respectively.

Conclusion

Chipotle’s first-quarter 2025 earnings report is likely to bring both promise and caution for investors. While the company has a solid record of beating earnings expectations and continues to benefit from growth initiatives like digital expansion and menu innovation, several headwinds are worth noting.

Rising labor and food costs, along with weather-related disruptions, could weigh on margins and temper the positive impact of increased transactions and store openings. Additionally, with shares already outperforming most peers and trading at a premium valuation, much of the optimism seems priced in.

Given this setup, current investors might benefit from holding their positions, but it would be prudent for new buyers to wait until the company’s quarterly results are released to get a clearer view of its near-term trajectory.

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This article originally published on Zacks Investment Research (zacks.com).

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