Chipotle is expected to post strong earnings in the second quarter as the company remains competitive in terms of value

Chipotle (CMG) is expected to maintain its industry-leading position despite the difficult restaurant landscape with tight consumers’ budgets.

The California-based burrito chain will report earnings after the market closes on Wednesday. Wall Street is expecting another strong quarter with revenue of $2.94 billion, up 17 percent from a year ago, and adjusted earnings per share of $0.32, up 25 percent from a year ago.

Customer traffic is expected to be 6.3% higher, but average check size will only increase by 2.63%.

Deutsche Bank analyst Lauren Silberman expects revenue growth this quarter to be the “highest of the year.”

“However, customer traffic and like-for-like sales should remain strong in the second half of the year, supported by a strong innovation and marketing pipeline, while throughput remains one of the key multi-year customer traffic drivers,” she wrote in a note to clients.

UBS analyst Dennis Geiger described the company as “one of the best positioned concepts to maintain sales momentum in a difficult macroeconomic environment, as customers have a high brand affinity and offer a solid price-performance ratio.”

But pickier customers and cheaper meals from fast-food providers like McDonald’s (MCD) could pose a threat, Wedbush analyst Nick Setyan wrote in a note to clients.

“On the other hand, we would rather err on the side of caution and view quick service restaurant aggressiveness as a short-term (albeit minor) headwind for Chipotle, Wingstop and Shake Shack,” he wrote in a note to customers.

Bernstein analyst Danilo Gargiulo, who gives the stock an “outperform” rating and a price target of $80, wrote that the fast-casual restaurant could still make further adjustments to keep the flame burning in the long term.

These include introducing late-night or breakfast opening hours, revamping the loyalty program and targeting Generation Z fans as this demographic increasingly becomes household decision-makers.

This quarter, some on Wall Street were keeping an eye on portion sizes at Chipotle, such as Wells Fargo analyst Zachary Fadem, who tracked portion sizes at eight Chipotle stores in New York City and ordered the same burrito bowl 75 times.

Others believe that the company will weather the wave without any problems.

“I don’t think consumers are really going to stop going to Chipotle just because they feel like their bowls are a little smaller,” BTIG’s Peter Saleh told Yahoo Finance by phone. He said customers would likely ask for more if they want it.

“This issue and this backlash on social media will not last,” Saleh added.

The story goes on

In the second quarter, the company conducted its first 50-for-1 stock split. Since then, shares have fallen nearly 18% to nearly $53 in the last month.

Based on Bloomberg consensus data, Wall Street expects the following from Chipotle in the second quarter of 2024 compared to the second quarter of 2023:

• Revenue: $2.94 billion compared to $2.5 billion

• Adjusted earnings per share: $0.32 versus $0.25 ($12.32 before stock split)

• Sales growth in comparable stores: 9.23% versus 7.4%

Starting from the first quarter, the Company expects full-year revenue growth in the mid- to high-single-digit range, above the previous forecast of mid-single-digit growth.

Wall Street expects the company to end the second quarter with a total of 3,540 locations. In the first quarter, Chipotle opened 47 new restaurants, 43 of which feature the Chipotlane drive-in concept. This year, the company expects to open 285 to 315 new locations, more than 80% of which will feature the drive-in concept. In the long term, the company plans to operate 7,000 restaurants in North America.

After the first quarter, CEO Brian Niccol told investors that the results “instill confidence that we can achieve our long-term goal of more than doubling our business in North America and expanding internationally.”

—

Brooke DiPalma is a senior reporter at Yahoo Finance. Follow her on Twitter at @Subscribe to or email her at [email protected].

Click here for the latest stock market news and detailed analysis, including events that move stocks

Read the latest financial and business news from Yahoo Finance