Chipotle Mexican Grill (CMG) Stock: Climbing Big on Buy Back After Earnings Miss

Chipotle Mexican Grill, Inc. (NYSE: CMG)

Chipotle Mexican Grill is having an incredible day in the market today, and for good reason. The company released its earnings report for the most recent quarter. While earnings were a miss, a big buyback was announced, showing internal faith in future growth. Today, we’ll talk about the report, the buyback, how the stock reacted to the news, and what we can expect to see from CMG moving forward.

CMG Reports Q2 Earnings

As mentioned above Chipotle Mexican Grill reported its earnings for the second quarter earlier today. Unfortunately, the company missed expectations in both earnings per share and revenue. Here’s what we saw…

  • Earnings Per Share – In terms of earnings per share, CMG released some disappointing results, During the quarter, analysts expected that the company would generate earnings in the amount of $0.93 per share. However, the company actually reported earnings in the amount of $0.87 per share. This represents a massive decline from $4.45 per share reported in the same quarter one year ago.
  • Revenue – Unfortunately, revenue wasn’t any better. During the second quarter, analysts expected that CMG would generate revenue in the amount of $1.05 billion. However, the company actually reported that second quarter revenue came in at $998.4 million.

While the earnings report itself was negative overall, there was some good news offered today. That has to do with buybacks.

Company Buybacks

On top of reporting earnings today, we learned quite a bit about company share buybacks. Ever since the E. coli and norovirus outbreaks, Chipotle Mexican Grill has continued buying shares of its own stock, taking advantage of the low prices. This shows that the company has confidence that its stock will climb again and increases investor confidence in the stock.

Today, we found out that during the second quarter, CMG spent quite a bit of money on buybacks. In fact, the company purchased $116 million worth of its own stock. While the buybacks look good for investors, the company is eating through its cash and investments, which have fallen to $270.1 million from $879.2 million one year ago.

How The Market Reacted To The News

While the earnings report that was released was overwhelmingly negative, it seems as though CMG investors are shrugging off that data and focusing on the buybacks. At the end of the day, this quarter wasn’t expected to be a very strong one in the first place. So, anything that insinuates confidence that the company will be able to turn things around is positive. The buybacks during the quarter are a strong insinuation of this. As a result, we’re seeing strong gains in the market today. Currently (3:57), the stock is trading at $442.52 per share after a gain of $24.49 per share or 5.86% thus far today.

What We Can Expect To See Moving Forward

Moving forward, I maintain a relatively bullish opinion of what we can expect to see from Chipotle Mexican Grill. The reality is that the company is struggling as the result of last year’s outbreaks. However, as time passes, consumers are realizing that it is safe to eat at their restaurants. At the end of the day, the recovery is going to be a long, uphill road for CMG. However, in the long run, I think this one will climb dramatically.

What Do You Think?

Where do you think CMG is headed moving forward? Join the discussion in the comments below!