Stocks pulled back on Wednesday, with the Dow Jones Industrial Average (DJINDICES: ^DJI) and the S&P 500 (SNPINDEX: ^GSPC) both closing down about half a percent.
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Transportation stocks were particularly weak today, and the iShares Transportation Average ETF (NYSEMKT: IYT) slid 1.5%. The price of crude oil fell, taking with it energy stocks; the SPDR S&P Oil & Gas Exploration & Production ETF (NYSEMKT: XOP) fell 0.9%.
As for individual stocks, Chipotle Mexican Grill (NYSE: CMG) reported a quarter that left investors unconvinced that its recovery is intact, and Grubhub (NYSE: GRUB) soared on strong sales growth.
Chipotle fails to satisfy (again)
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Shares of struggling burrito chain Chipotle Mexican Grill were hammered today, falling 14.6% after the company announced results that failed to meet already-low expectations and reduced guidance for full-year comparable-restaurant sales. Revenue in the third quarter increased 8.8% to $1.13 billion, slightly less than the $1.14 billion Wall Street was expecting, and comparable-restaurant sales growth was 1%, also below what observers had anticipated. The company now expects comparable-restaurant sales growth for the full year to come in at 6.5%, as compared to guidance last quarter of "high single digits."
Earnings per share came in at $0.69, but that was after subtracting a charge of $0.64 relating to a data security breach earlier in the year and $0.13 for the impact of Hurricanes Harvey and Irma. Without those one-time events, EPS would have been $1.46 -- still far short of the $1.63 analysts were expecting.
Besides the rather large miss on the bottom line, the new information that probably did the most damage to the stock price was guidance. Comparable-restaurant sales growth for the first nine months of 2017, including this quarter's anemic performance, was a respectable 8.3%, in line with the guidance for the full year. The new guidance of 6.5% for the full year implies that next quarter's comps may be even worse than Q3's, although Chipotle management denied in the conference call that they were expecting a negative number. Executives also said to expect new restaurant openings this year to be "slightly below the low end" of previous guidance of 195 to 210 stores, and the pace of store openings in 2018 will slow to a range of 130 to 150.
Grubhub delivers a delicious quarter
Meal pickup and delivery service Grubhub reported better-than-expected results for the third quarter and increased its sales forecast, causing its shares to soar 11.2%. Revenue was up a whopping 32% to $163.1 million, while analysts were looking for $159.7 million. Non-GAAP net income was up 23% to $24.5 million, or $0.28 per diluted share, compared with the analyst consensus of $0.24 per share.
Grubhub's operational metrics reflected the growing popularity of the service, which fed 9.81 million active diners in the quarter, an increase of 28% over last year. The average number of orders per day increased 14% and gross food sales were up 18%.
The company has been aggressively buying up smaller peers, including Eat24, Foodler, and OrderUp in recent months, and management indicated the shopping spree will continue. "With a network of 75,000 restaurants and growing, we have the industry's largest online delivery marketplace, and we will continue to aggressively expand and deepen our reach, increasing our value to both diners and restaurant partners as we grow," said CEO Matt Maloney in the press release.
Grubhub is fending off challenges from UberEats and Amazon Restaurants by building its restaurant base and teaming up with Facebook, Yelp, TripAdvisor, and Groupon. The strategy is working, and investors gave the stock a big vote of confidence today.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jim Crumly owns shares of AMZN, Chipotle Mexican Grill, FB, and TRIP and has the following options: long January 2019 $80 calls on FB. The Motley Fool owns shares of and recommends AMZN, Chipotle Mexican Grill, FB, and TRIP. The Motley Fool recommends YELP. The Motley Fool has a disclosure policy.