Shake Shack and Brinker International, parent of Chili's and Maggiano's chains, swept higher on healthy Q3 reports early Wednesday. Chipotle Mexican Grill slumped after posting mixed results late Tuesday. Wingstop dived after an earnings miss.
McDonald's had edged out Q3 earnings views early Tuesday, as the Dow Jones fast food chain contends with fallout after an E. coli outbreak. It reported earnings of $3.23 per share adjusted on 3% revenue growth to $6.9 billion.
FactSet expected earnings of $3.21 per share adjusted, up 2 cents from last year, on $6.82 billion in sales.
Global same-store sales decreased 1.5%, greater than the 0.6% decline analysts expected. U.S. comparable sales ticked up 0.3% for the quarter, driven by average check growth. Comparable guest numbers declined slightly in the U.S.
McDonald's earnings growth has slowed over the last four quarters, to a 6% decline for its Q2 report.
MCD stock dipped 0.5% early Wednesday. A 0.6% loss on Tuesday stifled an attempt to rebound off its 50-day moving average.
Shake Shack
Shake Shack delivered adjusted EPS of 25 cents, a 47% jump. Analysts had forecast Shake earnings would increase 2 cents to 19 cents per share.
Third-quarter revenue sales climbed nearly 15%, to $316.92 million. Analysts projected a 14.5% gain to $316 million.
Same-shack sales rose 4%, just above expectations for a 3.6% gain, and accelerating from 2.3% growth last year.
SHAK stock jumped more than 8% early Wednesday. Shares ended Tuesday up a little less than 3% for the week, and low in a buy zone, above a 111.17 buy point for a cup-with-handle base.
SHAK stock vaulted more than 54% so far this year.
Chipotle
Chipotle reported a 17% increase in earnings to 27 cents per share adjusted, while revenue increased 13% to $2.8 billion.
FactSet expected adjusted earnings of 25 cents per share on $2.82 billion in sales.
Comparable sales increased 6%, driven by 3.3% transaction growth and a 2.7% increase in the average check. However, comparable sales growth fell short of analyst estimates for a 6.3% increase.
Food, beverage and packaging costs rose slightly to 30.6% of total revenue due to ingredient inflation, primarily for avocados and dairy products.
Chipotle guided 2024 comparable sales growth in the mid- to high-single-digit range, in line with the FactSet 7.5% growth estimate.
Chipotle shares fell 4.8% after hours Tuesday. The stock ticked lower during daily trade.
Prior to earnings, CMG stock was working up the right side of a 19-week consolidation, and remains about 14% below its high from June.
Chipotle stock slunk 3.8% lower early Wednesday. The stock had popped above an early entry opportunity at 60.10 — a three-weeks-tight pattern that had formed within a larger base.
CMG stock rallied about 33% in 2024.
Brinker Up 27% in October
Brinker International, owner of the Chili's, Maggiano's and It's Just Wings restaurant chains, reported a 239% surge in earnings, to 95 cents a share. Analysts had expected a 145% leap.
Revenue was $1.14 billion, up 13%, vs. views for a 9% gain.
Management boosted its full-year earnings guidance to between $5.20 and 5.50 a share, up from $4.35 to $4.75. Consensus views were at $4.83.
Brinker shares jumped 6% in premarket trade. The stock broke out from a cup-with-handle base in September. It entered the 20% profit-taking zone from that breakout on Oct. 15. Shares at Tuesday's close were up 27% in October, with a year-to-date gain of 125%.
Wingstop
Wingstop shares cratered more than 12% after the company reported 88 cents EPS. FactSet numbers showed a target of 96 cents per share.
Revenue came in above forecast, at $162.5 million, vs. views for $160.2 million.
Wingstop's same store sales jumped 20.9%, well above estimates for an 11.4% gain, and sharply above a 6% increase last year.
WING stock has retreated from a late-September record high, and was fighting to hold support at its 200-day moving average. Wingstop shares rose almost 44% this year through Tuesday's close.
E. Coli Outbreak Hits McDonald's
MCD stock tumbled last week after the Centers for Disease Control and Prevention and the Food and Drug Administration on Oct. 22 warned of an E. coli outbreak, linked to McDonald's Quarter Pounder hamburgers. The CDC was initially unsure if the E. coli outbreak stemmed from the onions or beef in the burgers, but determined it was the onions. Meanwhile, Taylor Farms, the onion supplier for McDonald's, initiated a recall of its yellow onions. McDonald's also temporarily suspended Quarter Pounder sales in some affected states.
The fast food giant ruled out its beef patties as the source on Sunday. "We remain very confident that any contaminated product related to this outbreak has been removed from our supply chain and is out of all McDonald's restaurants," Cesar Pina, chief supply chain officer for McDonald's North America, said in the news release.
As of Friday, the E. coli outbreak was linked to 75 illnesses across 13 states, with 22 hospitalizations and one death.
Following the CDC announcement, JPMorgan and Morgan Stanley noted they don't expect the outbreak to cause much long-term damage. Morgan Stanley analysts on Oct. 23 wrote that the outbreak being contained to a single ingredient would be the "best outcome" for this type of scenario, and added that McDonald's "usually had a good track record on food safety globally." JPMorgan said that it bought McDonald's shares on the sell-off, adding that the company's supply chain should be able to make quick fixes.
McDonald's Not Alone Dealing With Illness
McDonald's isn't the first chain to face foodborne illness outbreaks. Chipotle Mexican Grill was hit with an E. coli outbreak in 2015 and temporarily shut down operations for food safety training. The company in 2020 agreed to pay a $25 million fine to resolve criminal charges that its adulterated food sickened more than 1,100 people in the U.S. from 2015 to 2018.
Wedbush last week said the comparisons to the Chipotle outbreak are "misplaced," as McDonald's has the scale to respond and contain the issue far more quickly than Chipotle did at the time of its outbreak.
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