Bear Of The Day: Chipotle Mexican Grill

The hits just keep coming for Chipotle Mexican Grill (CMG – Analyst Report) making this one of the easiest Bear of the Day articles I have written in quite some time. After all, the once-surging restaurant chain has been inundated with worries over the safety of its food as a number of E. coli outbreaks have hit the company, impacting customers across the country.

There have now been five infections (of varying types) that have been linked to Chipotle since this summer, making hundreds sick. And for a company that built its reputation on high quality ingredients and better practices when compared to its fast food competitors, this is a brand disaster.

That is probably why shares of Chipotle have fallen by nearly 20% in the last six months and they have fallen tumbled close to 33% since their 52 week high back in August. And with this sort of broad bearishness, analysts have been racing to slash their estimates for CMG stock as of late, painting a pretty brutal picture for the current quarter and the full year as well.

Recent Estimates

All fresh estimates for CMG stock have gone lower in the past sixty days as not a single analyst feels more bullish on the current outlook of Chipotle in this environment. And not only have estimates gone lower, but they have truly collapsed in recent weeks with a nearly 10% decline in expectations for the full year, and then a 16.8% decline in expectations for the following year. Topping things off though is a 40% slump in expectations for the current quarter as the food safety scare takes hold and crushes sales heading into 2016.

In fact, 90 days ago, estimates for the current quarter were at a pretty robust $4.39/share in EPS. But as more questions have cropped up over the food safety, they have been slashed to the bone and stand at just $2.60/share today, representing a 32% decline year-over-year.

For these reasons, it should be pretty clear why CMG is a Zacks Rank #5 (Strong Sell) and that we are looking for more underperformance as Chipotle battles against declining public opinion and attempts to turn things around in 2016.