Chipotle beats earnings as price hikes help offset higher food costs

Chipotle (CMG) reported its third quarter earnings results on Thursday after the market close, beating estimates on its earnings and same-store sales.Its stock jumped 5% after the report in extended trading, before paring back those gains.Revenue grew 11% to $2.47 billion as same-store sales increased 5%, slightly higher than estimates of 4.37%. The company also posted a bottom-line beat, with adjusted earnings per share coming in at $11.36, compared to the $10.51 expected by analysts.The quarter is boosted by the return of the Carne Asada in mid-September, a fan favorite in 2019. The limited-time offering laps the "lackluster performance of Garlic Guajillo" this time in 2022, Wedbush analyst Nick Setyan said in a note to clients. However, last year's Q3 boasted a same-store sale growth of 7.6%.Chipotle's CEO Brian Niccol maintains that the company's value proposition is "stronger than ever," per the earnings release.Operating margin for the quarter was slightly higher, up 16.0%. Digital sales made up 36.6% of total revenue, lower than last quarter's 38%.Increasing food cost, including higher prices for beef and queso, were offset by price hikes taken last year. This comes after the company announced plans to raise menu prices for the fourth time in two years.While the company hasn't said when or how much prices will change, many on the street speculate it will be roughly a 3%-3.5% increase in the middle of Q4 when an updated menu typically comes out.Chipotle's growth prospects remains intact. It's expecting restaurant sales growth in the mid to high-single digit range for Q4, per its guidance.The earnings rundownHere's what Chipotle reported, compared to Wall Street estimates per Bloomberg consensus data:Net sales: $2.47 billion versus $2.47 billion expectedAdjusted EPS: $11.36 versus $10.51 expectedSame-store sales: 5.0% versus 4.37% expectedOperating margin: 16.0% versus 15.4% expectedStory continuesNet addition of locations: 62 versus 67.14The burrito chain is liked among Wall Street, with 24 Buys, 10 Holds, and no Sells as of Thursday. Year to date, Chipotle shares are up around 32%, handily beating S&P 500 (^GSPC)'s 8% gain.It's considered a "top pick," based on the strength of its "fundamental story" with accelerating unit growth and margin expansion, according to a note from Deutsche Bank analyst Lauren Silberman."There is a scarcity value for a high quality, US-based company with a clean balance sheet, strong fundamentals and upside to numbers," she said.In Q3, Chipotle opened 62 restaurants, with 54 including its drive-thru feature Chipotlane. At the end of Q3, there were more than 3,300 total restaurants. Long term, it plans to operate 7,000 restaurants in North America.In 2024, the company plans to open 285 to 315 new locations.—Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at [email protected] here for the latest stock market news and in-depth analysis, including events that move stocksRead the latest financial and business news from Yahoo Finance