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Have Analysts Become Bearish on Chipotle After Health Incidents?

By John Butters, Senior Earnings Analyst
Dec 11, 2015

This past week, Chipotle Mexican Grill temporarily closed a store in Massachusetts due to reports of several customers becoming ill after eating at the Boston-area location. Last Friday, Chipotle issued EPS guidance for the fourth quarter (in the range of $2.45 to $2.85) that was below the mean estimate of analysts ($4.19) due to the E. coli incident linked to a number of Chipotle stores in Oregon and Washington in early November. Given these announcements, have analysts revised their outlook for Chipotle over the past few weeks?

The answer is yes. In terms of EPS expectations, the mean EPS estimate for FY 2015 has dropped by 9.7% (to $15.53 from $17.21) since November 30, while the mean EPS estimate for FY 2016 has dropped by 14.1% (to $17.04 from $19.85) since November 30.

In terms of target prices, the mean target price for Chipotle has fallen by 14.5% (to $586.35 from $685.84) since the end of last month. It is interesting to note that this mean target price is still 1.9% above the December 10 closing price of $575.43.

In terms of ratings, the number of Buy ratings has decreased by two (to 15 from 17), the number of Hold ratings has increased by two (to 15 from 13), and the number of Sell ratings has remained unchanged (one) since November 30. Chipotle now has a lower percentage of Buy ratings than the S&P 500 aggregate (48% vs. 50%), a higher percentage of Hold ratings that the S&P 500 aggregate (48% vs. 45%), and a lower percentage of Sell ratings than the S&P 500 aggregate (3% vs. 5%).

Since November 30, the price of the stock has declined by just 0.7%. However, since October 31, the price of the stock has decreased by 10.1%.

Read more about earnings trends in this edition of FactSet Earnings Insight. Visit www.factset.com/earningsinsight to launch the latest report.

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