Why Did Chipotle Mexican Grill, Inc. Shares Climb 31% in April?

The market now believes that Chipotle's (NYSE: CMG) turnaround has taken hold. That's partly due to the company's strong first-quarter results, and partly due to the optimism created by the hiring of new CEO Brian Niccol.

What happened

Q1 revenue rose by 7.4%, to $1.1 billion. In addition, comparable-restaurant sales increased by 2.2% and restaurant-level operating margin increased to 19.5% from 17.7%. Earnings per share (EPS) came in at $2.13, a 33.1% increase from the year-ago period.

"While the company made notable progress during the quarter, I firmly believe we can accelerate that progress in the future," said Niccol in the earnings release. "We are in the process of forming a path to greater performance in sales, transactions, margins and new restaurants."

So what

Investors clearly are happy with Niccol and the changes he has promised. Even though things aren't much different, the promise that change is coming has sent shares rising. After closing March at $323.11 a share, the chain's stock closed April at $423.33, a 31% gain according to data provided by S&P Global Market Intelligence.

Now what

Niccol has promised more menu innovation and that Chipotle will become a more responsive company. He has also pledged not to reduce standards, and it seems likely he won't be as rigid as his predecessor Steve Ells when it comes to giving customers what they want.

"Chipotle will have a culture that is centered on running great restaurants, putting the customer first, innovating for today and tomorrow, supporting each other, and delivering on commitments," he said.

Whether these gains continue depends on his ability to deliver on these promises. That seems likely, as Niccol proved himself a capable, adaptable leader while he was CEO at Taco Bell. His challenge will be to balance his flair for marketing with protecting Chipotle's core value of delivering high-quality food.

10 stocks we like better than Chipotle Mexican GrillWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Chipotle Mexican Grill wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of April 2, 2018

Daniel B. Kline has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Chipotle Mexican Grill. The Motley Fool has a disclosure policy.