Chipotle (CMG:NYSE) disappoints, as Fortinet (FTNT:NASDAQ) beats

Chipotle Mexican Grill (CMG:NYSE) shares fell more than 4% in extended trading after the restaurant chain missed quarterly earnings and revenue expectations.

The burrito chain reported fourth-quarter net income of $223.7 million, or $8.02 per share, up from $133.5 million, or $4.69 per share, a year earlier.

Net sales climbed 11.2% to $2.18 billion for the fourth quarter. Digital sales represented more than a third of its total revenue. Menu prices were up 13.5% year over year.

Higher menu prices helped offset rising food costs as the company paid more for dairy, tortillas, beans, rice and salsa during the period ended Dec. 31. Executives also said the company spent more in sick pay and medical claims than expected.

It’s the first time since Chipotle’s third-quarter report in 2017 that the company has fallen short of Wall Street’s estimates for both quarterly earnings and revenue, according to Refinitiv data.

Executives blamed weak traffic in the fourth quarter on an underperforming limited-time menu item, tough comparisons to the previous year’s brisket launch and weather.

Chief Financial Officer Jack Hartung said during the company’s conference call that Chipotle “didn’t see that pop, that momentum” that it typically gets around the holidays, ending the quarter “soft.”

The company said it’s projecting same-store sales growth in the high single digits for the first quarter of 2023, based on January same-store sales growth in the low double digits. Wall Street was anticipating first-quarter same-store sales of 6.7%, according to StreetAccount estimates.

Executives did not provide an outlook for 2023 same-store sales growth, noting the possibility of a recession, but said that same-store sales will likely moderate in the second and third quarter.

CEO Brian Niccol maintained the company hasn’t seen backlash to higher prices for its burrito bowls and tacos, despite declining transactions for the second consecutive quarter.

Restaurant traffic trends have reversed heading into the new year and through January, though, according to Niccol. Traffic last month grew year over year, he said. However, this time last year the company was reeling from a wave of Covid infections that caused some locations to shorten hours or temporarily close due to sick employees.

The company plans to open between 255 and 285 new locations this year, including relocating 10 to 15 restaurants to add a drive-thru lane. Last month, Chipotle said it is looking to hire 15,000 workers by this spring ahead of its busiest time of the year.

Shares of Chipotle fell 5.22% in extended trading Tuesday

Meanwhile, cybersecurity stock Fortinet (FTNT:NASDAQ) jumped as much as 18% in extended trading Tuesday after topping earnings per share estimates and gave a slightly better-than-expected outlook forecast for the year

Fortinet came out with quarterly earnings of $0.44 per share, beating the Wall Street’s estimate of $0.39 per share. This compares to earnings of $0.25 per share a year ago.

The company reported fourth-quarter net income of $313.8 million, or 40 cents a share, compared with $199 million, or 24 cents a share, in the year-ago period. Revenue rose to $1.28 billion from $963.6 million in the year-ago quarter, while billings rose 32% to $1.72 billion.

This quarterly report represents an earnings surprise of 12.82%. Over the last four quarters, the company has surpassed consensus EPS estimates four times.

In the last five years, Fortinet has managed to grow its earnings per share at 58% a year. Investors who held Fortinet shares in that period have seen their shares appreciate by 440%. Currently, Fortinet is underperforming the broader market as its shares are down 17% for the year, against the 9.4% decline by S&P 500.

As cybersecurity continues to be a growing issue, companies in the space like Fortinet would continue to benefit from increased demand. Fortinet shares closed 3.44% higher in regular trading.