Chipotle, McDonald’s and other restaurant revenue is coming. What to expect.
Restaurant revenues will start rolling this week, and given March retail sales data showed a big jump in restaurants, investors could be optimistic about quarterly results. Yet many factors make the outlook bleaker.
Chipotle Mexican Grill
(CMG) will kick off the season with results expected after the bell on Tuesday, as the two
(DPZ) are scheduled for Thursday. Analysts are looking for all three to accelerate earnings growth. Consensus calls for Chipotle to earn $5.65 per share, down from $5.36 last year, McDonald’s to earn $2.17 from $1.92, and Domino’s to earn $3.06, from $3.
That said, analysts recently lowered their estimates for the quarter, according to FactSet data.
It’s not hard to see why retail sales posted a strong year-over-year increase in restaurant spending last month. In March 2021, vaccines were still hard to come by for many, while this year Americans were looking to spend on activities — like restaurants — that were on hold during the pandemic. Higher food prices mean eating out also means spending more.
Still, analysts are cautious for a number of reasons – while the impact of Russia’s invasion of Ukraine has been a concern for international businesses, even domestic restaurants are facing ever-rising inflation, which simultaneously pushed up food prices and labor costs. , and reduced the purchasing power of their customers.
Christopher Carril of RBC Capital Markets on Thursday lowered his estimates for the first calendar quarter by around 5% on average for the group. “At this point, we generally see limited opportunities for upside first-quarter earnings, as we believe restaurant stocks are likely to receive little credit for in-line or better-than-expected results, while earnings losses validate concerns. in the future.”
Aside from actual results, which he says will show strong selling tied to pent-up demand, he thinks investors will focus on the outlook for restaurants, particularly in the second half, and management’s comments on continued health. of the consumer, vis-à-vis the recent price increases.
Still, Carril reiterated outperform ratings on all three stocks, leaving his $2,000 price target on Chipotle unchanged. He lowered his target on McDonald’s to $287 from $303 and on Domino’s to $480 from $525.
Chipotle shares are at $1,480.85, down 15.3% this year. McDonald’s stock is at $250.17, down 6.7% year-to-date. Domino’s recently traded at $378.83, down about 33% year-to-date.
Write to Teresa Rivas at [email protected]