Message Font: Serif | Sans-Serif
No. of Recommendations: 5
Merrill Lynch released their latest CMG analyst report on 9/5. Below are some of the highlights from the report by Rachael Rothman.

- They are raising 2006 and 2007 EPS estimates to $1.04 for 06 and $1.27 for 07 on stronger than expected margin expansion. They are expecting $.24 for the current 3rd quarter.

- Expect "limited overhang" on CMG stock from the MCD tax free exchange.

- Rate CMG neutral. High relative valuation but above average SSS growth should support near term valuation.

- Termination of MCD relationship may not have material impact. CMG is in process of negotiating prices with suppliers and distributors as a sole entity. Current Coca-Cola pricing will remain the same.

- The great majority of growth (87%) in near term will be in existing markets. First half of 06 they added 5 units in new markets (NC, Detroit). Second half they will add 5-7 units in new markets.

- Margin expansion is being driven by lower food costs and sales leverage.

- Focus on Food with Integrity & customer experience is a positive. CMG is also working on improved designs to accommodate higher volume.

Overall a pretty good report. I still think the analyst is being a bit conservative on the EPS estimates. Doing a basic conservative DCF with her numbers would say that CMG is fairly priced right now. I think CMG will suprise on the upside though with EPS and that the current price is slightly undervalued. Hope this helps some of you out there. I know finding good info & analysis on CMG is a bit tough right now.
Print the post  


When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.