Chipotle Puts the Zoom in Montezuma

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Inflation got the better of Chipotle Mexican Grill (NYS: CMG) three months ago. The burrito roller battled back this time.

Chipotle posted strong third-quarter results yesterday. Revenue climbed 24% to $591.9 million, fueled by expansion and an impressive 11.3% spike in comparable-store sales. Food costs did outpace sales growth -- climbing 34% during the period -- but savings on other items kept margins in check on the way down to the bottom line. Earnings climbed 25% to $1.90 a share. Analysts were only banking on a profit of $1.85 a share on $584.1 million in revenue.

The quick-service chain's performance is a welcome change from its second-quarter showing. Earnings only grew 9% on a 22% top-line boost, as Chipotle was slow to pass on increasing food costs to its hungry customers. It didn't exactly win the inflation battle this round, but it was smart enough to push through a fair menu increase early in the period.

Chipotle is going where no Mexican chain -- outside of Yum! Brands' (NYS: YUM) Taco Bell, if you can call that Mexican -- has gone before. There were 1,162 Chipotle eateries open by the end of the quarter, and expansion still has plenty of room to run. Another 155 to 165 locations are on tap for next year.

Quick-service burrito rollers have peaked far earlier in their expansion cycles. Jack in the Box (NAS: JACK) is still pushing Qdoba, as its eatery count has grown from 515 to 564 over the past year, but it and privately held Moe's are exceptions to the rule. It's usually operators unloading their chains -- like Wendy's (NYS: WEN) did with Baja Fresh -- when the growth gets too unwieldy.

Chipotle is feeling a bit mortal. It's targeting comps to simply grow in the low single digits in 2012, a far cry from the 11.2% clip that it has maintained during the first nine months of this year.

Don't read too much into that guidance, though. A year ago Chipotle was also projecting same-store sales to grow at the same "low single-digit" pace. It obviously worked out considerably better than that.

Welcome back, Chipotle. After usually thumping analyst estimates, it's good to see that the rare second-quarter slip was an anomaly.

If you want to track Chipotle as it continues to grow, consider addingChipotle Mexican Grillto My Watchlist.

At the time this article was published The Motley Fool owns shares of Yum! Brands and Chipotle Mexican Grill. Motley Fool newsletter services have recommended buying shares of Yum! Brands and Chipotle Mexican Grill. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.     Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

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