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Oct. 22, 2019, 2:31 p.m. EDT

Chipotle earnings preview: Avocado prices are moderating and sales of carne asada are strong

Bank of America upgraded Chipotle stock as avocado pricing becomes more favorable

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By Tonya Garcia, MarketWatch

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“In 20 stores across the country, we found employees telling customers that carne asada was selling equal to or much more than steak and, in some cases, almost as much as chicken,” according to the SunTrust note. “While somewhat anecdotal and a small sample size, we believe that carne asada may be boosting check by more than our prior estimate of 150 basis points.”

Carne asada is priced 6% above steak and barbacoa and 21% higher than chicken, with chicken the far more popular protein, analysts said.

SunTrust rates Chipotle stock buy with a $900 price target.

Chipotle has an average hold stock rating, according to 34 analysts polled by FactSet. Chipotle has an average price target of $800.39.

See: ‘Totally bizarre!’ -- nutritionists see red over study playing down the health risks of red meat

Here’s what to watch for in Chipotle’s earnings:

Earnings: FactSet is guiding for earnings per share of $3.21, up from $2.16 last year.

Estimize, which crowdsources estimates from sell-side and buy-side analyst, hedge-fund managers, executives, academics and others, expects per-share earnings of $3.27.

Chipotle has beat FactSet earnings expectations the last seven quarters.

Sales: FactSet forecasts sales of $1.38 billion, up from $1.23 billion last year.

Estimize is guiding for sales of $1.39 billion.

Chipotle has beaten the FactSet sales estimates for the last three quarters.

Stock: Chipotle stock is up 11% for the last three months, and has rallied 91% over the past year.

The S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.45%   is up 9.2% for the past 12 months.

Don’t miss: Here’s how Beyond Meat can lose the lead in the plant-based meat category to Tyson

Other things to look for:

-Delivery is also giving Chipotle a bump. Stifel expects same-store sales to rise 10% to 11% with delivery available from about 95% of the company’s locations, or about 2,400 restaurants.

“The company continues to utilize free delivery incentives, sponsored either by DoorDash or itself, building upon its baseline demand following the offer, so we expect it will remain a key promotional tool,” Stifel wrote.

Stifel rates Chipotle stock hold with a $755 target price.

-In addition to delivery, analysts think the Chipotle’s loyalty program could grow to be a bigger asset. Chipotle said in September that it had about 6 million Rewards members.

“Beyond 2019, we believe the continuing growth in digital, supported by traction in loyalty, menu innovation, and marketing spend could enable a multiyear streak of mid-to-high single-digit same-store sales growth,” wrote Wedbush.

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Tonya Garcia is a MarketWatch reporter covering retail and consumer-oriented companies. You can follow her on Twitter @tgarcianyc. She is based in New York.

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