MCD - Why Are Chipotle Shares Sinking After Strong Earnings?
Chipotle (NYSE: CMG) reported Q3 2019 results on Oct. 22, and shares dropped from $850 to $770 in subsequent trading days, despite company earnings topping analysts' estimates by more than 15%.
Chipotle's quarterly revenues grew 14.6% to $1.4 billion, driven by 11% same-store sales growth, most of which was attributable to rising transaction volumes. This top-line result was in-line with both analyst estimates and company guidance. Additionally, the company enjoyed strength in online orders, which now make up nearly 19% of total sales.
Gross margin approached 20% for the trailing 12 months, marking the highest point since 2015 when the company dealt with input sourcing and quality control concerns that tarnished the brand's reputation. Price increases account for wider margins, and this pricing power suggests that management's long-term response to the contamination crises is working.