NEW YORK (TheStreet) -- Chipotle Mexican Grill (CMG) - Get Report stock is declining by 2.28% to $438.79 in pre-market trading on Wednesday, after the company disclosed that its comparable restaurant sales were down by 14.6% for the 2015 fourth quarter. The Mexican food chain is dealing with outbreaks of norovirus and E. coli in several states.
The company had estimated comparable restaurant sales would drop between 8% and 11% for the latest quarter.
December comparable restaurant sales declined by 30% following a norovirus outbreak in a Brighton, MA location and the discovery of new E. coli cases.
As of December 18, 53 cases of E. coli in nine states have been reported to the Centers for Disease Control and Prevention. The CDC also identified a second strain of E. coli last month.
Chipotle received a federal grand jury subpoena from the U.S. District Court for the Central District of California related to the investigation of an August 2015 norovirus outbreak in a Simi Valley, CA location. The investigation is being conducted by the U.S. Attorney's office in collaboration with the U.S. Food and Drug Administration.
The company maintains that the outbreak was an isolated incident and plans to cooperate with the investigation.
Additionally, Chipotle updated its 2015 fourth quarter earnings guidance to $1.70 to $1.90 per share, down from the previous outlook of $2.45 to $2.85 per share.
Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
We rate CHIPOTLE MEXICAN GRILL INC as a Buy with a ratings score of B. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, increase in net income and notable return on equity. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 1.1%. Since the same quarter one year prior, revenues rose by 12.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- CHIPOTLE MEXICAN GRILL INC has improved earnings per share by 10.6% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, CHIPOTLE MEXICAN GRILL INC increased its bottom line by earning $14.13 versus $10.46 in the prior year. This year, the market expects an improvement in earnings ($15.51 versus $14.13).
- The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Hotels, Restaurants & Leisure industry average. The net income increased by 10.8% when compared to the same quarter one year prior, going from $130.80 million to $144.88 million.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market on the basis of return on equity, CHIPOTLE MEXICAN GRILL INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- The gross profit margin for CHIPOTLE MEXICAN GRILL INC is currently lower than what is desirable, coming in at 28.31%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 11.90% trails that of the industry average.
- You can view the full analysis from the report here: CMG