Chipotle Mexican Grill (NYSE: CMG, $693.14) is scheduled to report earnings after today’s market close. The stock has been relatively flat in 2015 (up just under 1% YTD), but has been a very strong performer – CMG is up nearly 92% over the past 2 years.
Former parent company McDonald’s Corp. (NYSE: MCD, $94.84) has had nearly as lackluster a performance in 2015, with shares having risen an equally unimpressive 1.2%. Over the last 2 years, however, McDonald’s stock has fallen almost 5%, as increasingly health and quality conscious consumers in both domestic and foreign markets seek out healthier alternatives. McDonald’s is scheduled to release earnings following Wednesday’s market session.
The theme throughout this earnings cycle has been currency risk for non-dollar denominated businesses. With less than 10 stores outside the United Sates, Chipotle is largely impervious to this type of currency risk. This is not the case for MCD – overseas business accounts for 66% of revenues.
Historically, MCD stock isn’t the biggest earnings mover – only 1.2% on average, with this Friday’s Weekly MCD 95 Straddle implying a move of about 2.6%. The stock has fallen on earnings news 4 of the past 4 quarters, and 7 of the past 8.
Chipotle, on the other hand, moves an average of 10%, with this week’s Weekly CMG 690 Straddle implying a move of 6.7%. The stock has sold off 3 of the past 4 quarters, but only 7 of the past 8.
My Trades
CMG
- Buying the Weekly 725-735-745 Call Flys for $0.75
- Risk: $75 per 1 lot
- Reward: $925 per 1 lot
- Break-even: 725.75 and 744.25
MCD
- Buying the Weekly 93.5 – 92.5 Bear Put Spread for $0.25
- Risk: $25 per 1 lot
- Reward: $75 per 1 lot
- Break-even: $93.25
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