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Chipotle stock up ahead of quarterly report

Published 02/02/2016, 02:22 PM
Updated 02/02/2016, 02:30 PM
© Reuters. A Chipotle restaurant is shown in Federal Way, Washington
CMG
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By Noel Randewich

SAN FRANCISCO (Reuters) - Chipotle Mexican Grill's (N:CMG) stock climbed on Tuesday for a second consecutive day, ahead of the restaurant chain's fourth-quarter report, on bets that the fallout from recent outbreaks of food-borne illness has been fully priced in.

The stock rose 1.3 percent, bringing its two-day gain to almost 7 percent, after the U.S. Centers for Disease Control and Prevention said on Monday that recent E.coli outbreaks linked to Chipotle restaurants appeared to be over.

The stock has recovered 20 percent from a 3-year low of $404.26 hit on Jan. 12, bolstered by company assurances that it could prevent future outbreaks, but it remains down 33 percent from September.

A series of food-borne illnesses linked to Chipotle since October have driven away diners, hammered its high-flying stock and spawned both a federal criminal probe and a shareholder lawsuit.

While Taco Bell and other restaurant chains have been linked to E.coli outbreaks in the past, Chipotle's troubles have been magnified because it markets itself as a seller of healthy, high-quality food.

Its quarterly report after the market closes on Tuesday will give investors a fresh glimpse of how bad the damage has been, and how long it may take to recover.

Chipotle has said same-store sales would drop 14.6 in the December quarter, its first three-month decline since it went public in 2006. Wall Street expects a continued impact from the outbreaks, with 2016 revenue falling 21 percent and net income down 18 percent, according to Thomson Reuters data.

"I think you'll see first signs of a recovery in sales by the fourth quarter of this year, but I think even then it's going to be a gradual recovery," said Maxim analyst Stephen Anderson.

© Reuters. A Chipotle restaurant is shown in Federal Way, Washington

After two analysts raised their price targets for Chipotle's stock this week, the median target of analysts tracked by Thomson Reuters is $484, just above Tuesday's price of $480.90 but far below the median target of $756 just three months ago.

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