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This post is part of my series featuring established companies and the smaller, more aggressive or innovative rivals that may eventually succeed them.

The most impressive game-changer story in the fast food industry over the past 50 years is indisputably McDonald's (NYSE: MCD). Founder Ray Kroc was a visionary and pioneer in serving customers hot fast food at a reasonable price. Thirty thousand units later, McDonald's is still a growth story. But the better growth story is Chipotle Mexican Grill (NYSE: CMG), so much so, in fact, that McDonald's was an early investor in Chipotle! (McDonald's no longer owns shares of Chipotle.)

McDonald's went through some execution issues in the mid-1990s through 2003. The fast food industry was taking some hits from nutritionists, and the quality of food was suspect. McDonald's re-tooled its entire operation from store front to menu offerings. The standard hamburgers and those delicious french fries are still on the menu, but McDonald's has added a variety of salads, wraps and other healthier options. In the past five years the stock has nearly tripled in value, validating McDonald's make-over.

Chipotle, founded in 1993, has not had to re-tool or redefine itself. The freshest of ingredients, naturally raised poultry and beef are highlights of the limited, but superb menu. Chipotle is a favorite of almost every demographic group, from teenagers to the elderly. Chipotle has succeeded in offering the finest fresh Mexican food, but not at the cheapest price. The average ticket at Chipotle comes in near $9. The company recently raised prices at different levels depending on geography. Sales have not slowed a bit in spite of the price increases.

McDonald's has saturated its key markets and must make "the box" yield greater sales leverage. The company will add units strategically, but for the most part, the key real estate corners are already "Golden Arches" occupied. Whereas Chipotle, with only 730 units, has room to easily 10-fold that base over the next decade. This does not include any international expansion in the equation. The Chipotle concept is portable to selected nations that fancy Mexican food.

Only in existence for 15 years, Chipotle has defined the casual, fast-food Mexican industry. The company offered its initial public offering (IPO) on January 26, 2006, at $22 per share. The stock saw a high of $150 and now rests at $90, still a four-bagger since the IPO. The strength of the story lies in its flawless daily execution and fierce customer loyalty. Chipotle is a GameChanger company and Ray Kroc would be proud of Chipotle!

Georges Yared is the editor of YaredsGameChangers.com and author of the new report "How to Spot the Next Google."

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Three types of raw tomatoes -- red plum, red Roma and round red tomatoes -- grown in 17 states are voluntarily being pulled of the shelves and menus of McDonald's (NYSE: MCD), Wal-Mart (NYSE: WMT), Burger King (NYSE: BKC), Kroger (NYSE: KR), Outback Steakhouse, Winn-Dixie (NYSE: WINN) and Taco Bell, among others. In fact, "McDonald's has stopped serving sliced tomatoes on its sandwiches as a precaution, but will continue serving grape tomatoes in its salads because no problems have been linked to that variety."

Similarly, Burger King, Yum Brands Inc. (NYSE: YUM) restaurants, Darden Restaurants (NYSE: DRI), and Chipotle Mexican Grill Inc. (NYSE: CMG) have also removed the contaminated brands from their menus across the U.S., and some, like Burger King, in Canada, Puerto Rico and some other Caribbean islands as well. Many left the non-contaminated brands on the menu.

Getting salmonella is not fun. It's a bacteria that lives in the intestinal tracts of humans and most infected people suffer fever, diarrhea and abdominal cramps starting 12 to 72 hours after infection and lasting for 4-7 days. The FDA hasn't found the source of the contamination, although it usually means contact with animal feces.

Tomatoes are probably the healthiest thing in many fast food sandwiches and on many menu items, but I guess not when they are contaminated. It's just too bad that this happened in the midst of the "good tomatoes" season. After eating tomatoes that taste and feel like plastic all winter long, it's a treat to have those summery sweet tomatoes. I guess we'll just have to stick to the non-contaminated brands and cooked tomatoes dishes like tomato-based pasta sauces.

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MOST NOTEWORTHY: Ascent Solar, Xcorporeal and Chipotle Mexican Grill were today's noteworthy initiations.

• Cowen said Ascent Solar Technologies Inc.'s (NASDAQ: ASTI) unique thin-film solar technology is well suited for integrated applications. Shares were started with an Outperform rating.
• Roth Capital believes Xcorporeal Inc (AMEX: XCR) is targeting a large, unmet market, as the firm notes that 500K patients are expected to receive kidney therapy over the next few years. Roth, which initiated shares without a rating, anticipates that the company will obtain regulatory approval for the home therapy and critical care markets during the next few quarters, possibly creating a catalyst for the stock to appreciate.
• JP Morgan initiated the Class B shares of Chipotle Mexican Grill Inc (NYSE: CMG.B) with an Overweight rating as they believe the recent pullback provides a compelling entry point.

OTHER INITIATIONS:

• Lehman initiated NCR Corporation (NYSE: NCR) with an Overweight rating and $30 target.
• Sandler initiated Delphi Financial Group Inc (NYSE: DFG) with a Buy rating and $34 target.

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Next week is sure to be filled with fun and volatile market conditions. The highlight will be the Fed decision on key rates, due on Wednesday, April 30, following a two-day meeting. Anytime the Fed has the floor, the markets listen. Tuesday and Wednesday will be filled with speculation up until the time of the announcement of a cut or pause.

There are many possible outcomes for this meeting, as we have seen a substantial change in investor sentiment regarding the potential need for further rate cuts. The buzz on the street is for a cut of 25 basis points and then a wait-and-see attitude from there. I think that is the most likely direction.

There has been a great deal of concern that all the recent rate cuts have not provided the benefit to consumers the economy needs. Clearly, there is a fatty clog within our financial circulatory system. Traditionally, the Fed likes to see how its actions trickle into the economy before it continues too far down one path, which would argue for a pause now. Plus, the Fed does not want to run out of ammunition by cutting rates too far too fast. But there is no question that we are dealing with a more aggressive Fed than we have seen in decades, so I think we will see another small rate cut.

After the Fed announcement, earnings will again take center stage. Watch out for surprises as investors have been bidding up stocks with a vengeance. Misses have been taken in stride as investors don't seem worried about large bank failures anymore. The truth is, the Fed has created a monster with its bailout policy and I'm worried stocks are getting overpriced here.

It is going to be a busy week for earnings as the season is in full swing. Here is a day-by-day look at the week ahead at some of the opportunities investors may want to consider.

Monday April 28

Tyson Foods (NYSE: TSN) will be reporting. While this is not an exceptionally exciting report, it is one that will help to provide insight of just how bad the food crisis is and how the corn shortage is effecting profits. Last week we saw a considerable take-down for Chipotle Mexican Grill Inc. (NYSE: CMG) after it explained its outlook. First Call is expecting only $.01 EPS on $6.69 billion revenue as compared to EPS of $.19 for the same quarter last year.

Fair Issac Corp. (NYSE: FIC) has been in the hot seat as it is the company that created the FICO score. You know, the beloved company that provides lenders your credit rating/score. There has been quite a fallout over the ability of this company to properly gauge credit risk. The chart shows a recovery pattern filling toward the January gap-down. This is similar to what we have seen for many others that have rocketed on earnings lately.

If FIC manages to hit earnings, shares could get a nice pop. Shares are down 40% or so since November, and this report will show us how many lenders are looking to other companies to provide the data. Competitors taking over some of FIC's business may include the likes of Equifax Inc. (NYSE: EFX) and Experian Group Ltd. (LSE: EXPN). First Call is expecting $.43 per share on revenue of $204 million.

With that in mind, the credit card business is booming! Why you ask? People who are having trouble getting money these days are spending in a reckless manner with plastic. The winners here are Visa Inc. (NYSE: V) and Mastercard Inc. (NYSE: MA). Remember, neither of these companies has exposure to default as they are only processors of the transactions. There has been some talk about the negative effects that will be felt due to the Delta-Northwest merger as they will probably look to consolidate the card offering. What that really means to Visa is anyone's guess at this point.

On deck today are both Visa and Mastercard. The estimates are looking for an EPS of $1.99, up from a year ago of $1.57. Revenues are expected to come in at $1.06 billion. Visa is reporting its first earnings since it went public in March. There is a great deal of positive buzz on this name. Watch out as expectations are for a good number which could just as easily sink the stock if investors are disappointed. First Call estimates $.46 for the period.

Tuesday April 29

Food costs are out of control. Pizza inflation is the new buzzword and Archer Daniels Midland (NYSE: ADM) may continue to benefit from this new paradigm. It is expected to show a 50% increase in EPS to $.70 this quarter and revenues will rise to $12.45 billion. That is a lot of food product.

The theme continues on with Panera Bread (NASDAQ: PNRA) reporting. As mentioned above, food costs are eating away at restaurant profits and there could be a big disappointment brewing for this name. Remember, the extraordinary wheat prices will hit right in their gut as margin (and margarine) compression will hurt their costs.

Wednesday April 30

All eyes will be on the Fed decision this day. Greg Ip, from The Wall Street Journal, regularly writes about the Fed outlook as well as many of the factors that go into the Fed's decision. On this subject I invited him to be a guest this week on The Disciplined Investor Podcast. This episode will be available Monday.

In other earnings, investors are looking towards the darling, now scorned, Garmin (NASDAQ: GRMN) for direction on its future earnings path. Estimates for an increase of $.11 over same quarter last year will need to be met for investors to once again look kindly on this name. Shares have been beaten down with ferocity since January and stand at about 1/3 their value since the November 2007 high.

Thursday, May 1

Automatic Data Processing (NYSE: ADP) will report and give us a good look at the employment situation from a corporate standpoint. The ADP report will provide a look back, but there may be some tidbits within the conference call that may give us a look ahead. Estimates are for $.75 per share and $2.4 billion of revenue.

Exxon Mobile Corp. (NYSE: XOM) also reports today. The last few earnings releases have been whoppers. There is no reason to think that the total revenue number won't be gigantic. The street is looking for $124.43 billion for the period. Did someone say windfall tax?

Friday May 2

A lighter earnings day by far. Con Ed, Nortel, Viacom, take your pick. Nothing too exciting. Stay at home in your PJs.

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Disclosure: Horowitz & Company clients may hold positions of some of the stocks mentioned as of the publish date.

Andrew Horowitz is a money manager and author of the bestseller The Disciplined Investor: Essential Strategies for Success. See The Disciplined Investor Blog.

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Chipotle (NYSE:CMG) is recently up $1.90 to $116.90. CMG is scheduled to report Q1 EPS on April 23. Morgan Joseph says "Q108 should mark the first quarter of growth deceleration for CMG. While we believe CMG remains one of the best operators in the industry, we also believe that like its comps, it will eventually fall victim to the recessionary consumer environment." CMG May call option implied volatility is at 55, puts are at 65; above its 26-week average of 48, according to Track Data, suggesting larger price risk. CMG puts are priced higher than calls because CMG is difficult to borrow.

Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

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• Supercapitalism - The Transformation of Business, Democracy and Everyday Life.
• People are taught all along that "the big guys" bend the rules to get wealthy... Why not them?
• Harry Dent theory 2009 - What is the chance that we are entering a long term recession? Depression?
• WHERE IS THE NEXT PROBLEM?
• Via Barry Ritholtz: "Who should Obama replace Bernanke with?"
• The worldwide food shortage, how can we protect ourselves (fill them bunkers!)
• Seems to be a transparency problem today... people scratching their heads about what is going on.
• Unions? Any good any more? Do they serve any purpose?

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Darden Restaurants (NYSE: DRI) operates about 1,700 casual dining restaurants in the United States and Canada. Its Red Lobster (seafood), Olive Garden (Italian cuisine), LongHorn Steakhouse (steak), Bahama Breeze (Caribbean items) and Capital Grille (steak) chains cater to families, with mid-priced menu items and generally suburban locations. A small group of Seasons 52 restaurants feature a casual grill and wine bar concept. Brinker International (NYSE: EAT) and Chipotle Mexican Grill (NYSE: CMG) are competitors.

The company pleased investors last week, when it reported fiscal Q3 EPS of 85 cents and revenues of $1.81 billion. Analysts had been looking for 82 cents and $1.80 billion. Management also guided FY08 EPS to about $2.71-$2.76 ($2.72 consensus) and FY08 revenues to about $6.63-$6.68 billion ($6.64B consensus). Raymond James subsequently upgraded the shares to "strong buy".

The stock popped into a bullish "flag" consolidation pattern on the news. Prices frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.

Altogether, brokers now recommend the issue with three "strong buys", six "buys", six "holds" and one "sell". The DRI P/E ratio (13.59), PEG ratio (1.09), Price to Sales ratio (0.78), Price to Book ratio (3.72), Price to Cash Flow ratio (8.23), Sales Growth rate (24.98%), Return on Assets (9.25%), Return on Investment (13.35%) and Return on Equity (28.65%) compare favorably with industry, sector and S&P 500 averages. Institutions hold about 78% of the outstanding shares. The stock is one of those used to calculate the S&P 500 Index. Over the past 52 weeks, it has traded between $20.89 and $47.60. A stop-loss of $29.10 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold positions in any of the stocks mentioned above.

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MOST NOTEWORTHY: Chipotle Mexican Grill, Micrus Endovascular and Acorda Therapeutics were today's noteworthy initiations:

• Jefferies expects the quality gap between Chipotle Mexican Grill (NYSE: CMG) and its peers will become more apparent in a weakening consumer environment. The firm started shares with a Buy rating and $110 target.
  
• Micrus Endovascular (NASDAQ: MEND) was initiated with an Outperform rating and $20 target at Barrington, citing the company's strong product line, improving salesforce, leading market share position and their expectation for continued strong transition from clipping to coiling.
  
• Acorda Therapeutics (NASDAQ: ACOR) was assumed with an Overweight rating at JP Morgan, as they believe the company's Fampridine-SR for multiple sclerosis is a $500M + opportunity

OTHER INITIATIONS:

• Stanford initiated Mariner Energy (NYSE: ME) with a Buy rating and $35 target.
  
• Deutsche Bank assumed Liberty Entertainment (NASDAQ: LMDIA) with a Buy rating and $29 target.
  
• EnerNoc (NASDAQ: ENOC) was initiated with a Neutral rating at Broadpoint.

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Darden Restaurants (NYSE: DRI) operates about 1,700 casual dining restaurants in the United States and Canada. Its Red Lobster (seafood), Olive Garden (Italian cuisine), LongHorn Steakhouse (steak), Bahama Breeze (Caribbean items) and Capital Grille (steak) chains cater to families, with mid-priced menu items and generally suburban locations. A small group of Seasons 52 restaurants feature a casual grill and wine bar concept. Brinker International (NYSE: EAT) and Chipotle Mexican Grill (NYSE: CMG) are competitors.

The company pleased investors last week, when it guided fiscal Q3 EPS to 83-85 cents. Analysts had been looking for 77 cents. Management also said it expected Y08 EPS of about $2.71-$2.76 ($2.66 consensus).

DRI shares popped on the news and have since settled into a bullish "pennant" consolidation pattern. Prices frequently exit pennants moving in the same direction they were traveling on entry. In this case, that would be to the upside.

Brokers recommend the issue with three "strong buys", five "buys", eight "holds" and one "sell". The DRI P/E ratio (12.23), PEG ratio (0.99), Price to Sales ratio (0.74), Price to Book ratio (3.36), Price to Cash Flow ratio (7.56), Price to Free Cash Flow ratio (18.75), Return on Assets (9.31%), Return on Investment (13.37%) and Return on Equity (28.43%) compare favorably with industry, sector and S&P 500 averages. Institutions hold about 77% of the outstanding shares. The stock is one of those used to calculate the S&P 500 Index. Over the past 52 weeks, it has traded between $20.89 and $47.60. A stop-loss of $26.25 looks good here. Note that the firm is expected to announce Q3 results in mid-March.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold positions in any of the stocks mentioned above.

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For those who are new to BloggingStocks, I wrote a series back in May-June of 2007 highlighting what I thought could be the top 25 stocks for the NEXT 25 years. The series was written and researched as an answer to a USA Today article that highlighted the best 25 stocks of the past 25 years.

I wrote about Chipotle Mexican Grill (NYSE: CMG) back on May 21. The stock was trading at $82 per share, although I had been recommending it in my advisory service back when the shares were trading at $40. I thought, and still do, that Chipotle has a chance to be the next major American fast food restaurant chain. In September 2007, the shares hit $114-115, and frankly, I thought the stock was ahead of itself and needed to take a breather. I wrote an update piece explaining that although I still believed Chipotle will be a major player for the NEXT 25 years, it seemed prudent to take the opportunity for short term profits. Commodity costs were rising and the chain was not about to raise its menu prices to offset.

The shares proceeded to go as high as $155 and I thought that maybe I misread this one. The numbers were strong and I thought the momentum in the name might actually keep it afloat. Phew, finally, this one has come back to earth. Chipolte has fessed up that higher commodity costs and a slower spending consumer have taken their toll. The shares are back down to $105, representing a 30 P/E multiple on 2009 earnings per share expectations of $3.40. Still expensive, but this is a very high growth rate company.

I would wait for the shares to trade back below $90 before putting a toe in the water. The concept is viable and very popular. The chain has room to quadruple its store base in the United States and will emerge as the best new concept in this decade and the next. I'd keep an eye on the share value and start accumulating on major dips.

Georges Yared write about great growth stocks today in Game On Investing

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Here are some highlights of this past week's earnings coverage from BloggingStocks:

• Applied Materials Inc. (NASDAQ: AMAT) first-quarter profits fell due to market conditions.
• Best Buy Inc. (NYSE: BBY) lowered its earnings forecast on declining sales.
• Campbell Soup Co. (NYSE: CPB) posted unexciting second-quarter results, but shares rose anyway.
• Chipotle Mexican Grill Inc. (NYSE: CMG) posted solid results but fell short of expecations.
• Comcast Corp. (NASDAQ: CMCSA) beat expectations and annouced it first dividend in a decade.
• Denny's Corp. (NASDAQ: DENN) fourth-quarter results were dragged down by the sale of restaurants.
• General Motors Corp. (NYSE: GM) posted a record loss and made a buyout offer to union employees.
• Hasbro Inc. (NYSE: HAS) post better-than-expected fourth-quarter results on popularity of the Transformers.
• Jones Apparel Group Inc. (NYSE: JNY) narrowed its loss in the fourth quarter as restructuring continued.
• Lions Gate Entertainment Corp. (NYSE: LGF) missed earnings estimates despite strong revenue growth.
• Marriott International Inc. (NYSE: MAR) profit fell on losses from discontinued operations.
• Molson Coors Brewing Co. (NYSE: TAP) beat estimates as profits rose 75%.
• PolyOne Corp. (NYSE: POL) beat expectations and raised its guidance.
• Schering-Plough Corp. (NYSE: SGP) beat expectations, excluding a charge for acquistion costs.
• UBS (NYSE: UBS) posted a big loss on write-downs due to the subprime crisis.
• VNUS Medical Technologies Inc. (NASDAQ: VNUS) beat expectations on strength overseas.
• World Wrestling Entertainment (NYSE: WWE) beat expectations despite weakness in its movie business.

Also, Jim Cramer defends his interest in GM after its record loss.

Upcoming results to watch for include Wal-Mart (NYSE: WMT), Hewlett-Packard (NYSE: HPQ), OfficeMax (NYSE: OMX), Whole Foods (NASDAQ: WFMI), MGM Mirage (NYSE: MGM), JCPenney (NYSE: JCP), and Safeway (NYSE: SWY).

Visit AOL Money & Finance for more earnings coverage.

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MOST NOTEWORTHY:

• BioScrip (NASDAQ: BIOS) was raised to Buy from Neutral at Broadpoint, as they believe the company's specialty business is worth more than the current price implies.
  
• Baird upgraded Chipotle Mexican Grill (NYSE: CMG) to Outperform from Neutral following Q4 results, citing valuation and a positive view on fundamentals.
  
• CoStar Group (NASDAQ: CSGP) was upgraded to Outperform from Market Perform at JMP Securities, as they expect the company to report a solid quarter next Thursday.

• Groupe Danone (OTC: GDNNY) was upgraded to Buy from Hold at ING.
  
• UBS raised Senior Housing Properties (NYSE: SNH) and Fluor Corp (NYSE: FLR) to Buy from Neutral.
  
• Morgan Stanley upgraded RenaissanceRE Holdings (NYSE: RNR) to Overweight from Equal Weight.

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• At 8:30 a.m. EST, the Labor Department will report January import and export prices.
• At the same time, the Empire State Index will be released, giving an idea of the region's manufacturing activity.
• At 9:15 a.m. EST, January industrial production and capacity utilization will be released.
• At 10:00 a.m. EST, the University of Michigan will give its preliminary reading on consumer confidence in February.

• Reporting today arefood companies Campbell Soup (NYSE: CPB) and Hormel Foods (NYSE: HRL) as well as Abercrombie & Fitch (NYSE: ANF).
• Chipotle Mexican Grill (NYSE: CMG) share dropped over 13% in after-hours Thursday and may drop this morning after the restaurant owner reported fourth-quarter earnings that didn't grow as fast as forecast.

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Chipotle Mexican Grill (NYSE: CMG) experienced some delicious growth over its fourth quarter and full-year reporting period. As the press release issued on Valentine's Day after the market closed indicated, Q4 revenues spiced up almost 32% to $288.9 million, and diluted earnings soared 61% to $0.53 per stub. For the full year, revenues jumped 32% to $1.1 billion, and diluted earnings rocketed 66% to $2.13 per share.

But was this enough to satisfy the after-hours market? Nope -- at the time of this writing, the after-hours quote on Chipotle's stock was down almost 13%. I'll give you a second or two to guess why. Got it yet? Sure you do -- even if you hadn't already read the headlines, you must have intuited that Chipotle didn't meet analyst expectations. The sacrosanct Wall Street crowd wanted a couple pennies more for the quarter.

Well, I say the Chipotle story looks pretty good from where I'm sitting. Restaurant operating margins are up, comps are up over 10% for the quarter and the year, and new stores will continue to be rolled out. Plus, operational cash flow increased 42%. Chipotle, which used to be a part of McDonald's (NYSE: MCD), is becoming a major brand in the restaurant sector, and is a strong competitor against related companies such as Burger King (NYSE: BKC), Wendy's (NYSE: WEN), and Yum! Brands (NYSE: YUM).

Yes, economic times will be difficult going forward, as Ben Bernanke has warned, but I've got a sneaking suspicion Chipotle Mexican Grill's stock will recover from the recent pullback from its 52-week high of better than $155.

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Chipotle (NYSE: CMG) is recently down 29 cents to $117. CMG is expected to report EPS on February 14. Robert Baird says, "Remain confident in outlook, expecting robust trends to continue in 2008; maintaining Neutral rating on valuation."

CMG February call option implied volatility is at 68, puts are at 84, above its 26-week average of 42, according to Track Data, suggesting larger price risk. CMG puts are priced higher than calls because CMG is difficult to borrow.

Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

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An Orlando outfit became the number one casual dining operator in North America by offering multiple dining experiences to the critical family crowd.

Darden Restaurants (NYSE: DRI) operates more than 1,300 casual dining restaurants in the United States and Canada. Its Red Lobster (seafood), Olive Garden (Italian cuisine) and Bahama Breeze (Caribbean items) chains cater to families, with mid-priced menu items and suburban locations. A small group of Seasons 52 restaurants feature a casual grill and wine bar concept. Brinker International (NYSE: EAT) and Chipotle Mexican Grill (NYSE: CMG) are competitors.

The company pleased investors last month, when it reported fiscal Q1 EPS of 73 cents and revenues of $1.47 billion. Analysts had been expecting 70 cents and $1.45 billion. Management also guided FY08 revenues to about $6.25-6.31 billion, versus consensus of $6.08 billion. The company confirmed that it plans to buy back $125-175 million of its common stock in FY08.

Brokers recommend the stock with four "strong buys," six "buys," six "holds" and one "sell." The DRI P/E ratio (16.25), PEG ratio (1.36), Price to Sales ratio (1.08), Price to Cash Flow ratio (10.32), Price to Free Cash Flow ratio (27.63), EPS Growth rate (19.67%), Return on Assets (13.03%), Return on Investment (19.72%) and Return on Equity (31.81%) compare favorably with industry, sector and S&P 500 averages. Institutions hold about 81% of the outstanding shares. The stock is one of those used to calculate the S&P 500 Index. Over the past 52 weeks, it has traded between $38.11 and $47.60. A stop-loss of $37.80 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.

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MOST NOTEWORTHY:

• BigBand Networks Inc. (NASDAQ: BBND) was downgraded to Hold from Buy at Jefferies and to Market Perform from Outperform at Morgan Keegan on the company's negative Q2 pre-announcement to reflect decreased visibility.
  
• Citigroup downgraded Chipotle Mexican Grill Inc. (NYSE: CMG) to Hold from Buy on valuation.
  
• Vertex Pharmaceuticals Inc. (NASDAQ: VRTX) was downgraded to Neutral from Buy at Merrill Lynch, as they believe investor expectations are high into November's American Association for the Study of Liver Diseases meeting.
  
• Soleil downgraded Cognos Inc. (NASDAQ: COGN) to Hold from Buy as they believe the strong Canadian dollar will depress operating margins and limit share upside.

• Jefferies downgraded Spectra Energy Corp. (NYSE: SE) to Hold from Buy.
  
• Goldman downgraded MeadWestvaco Corp. (NYSE: MWV) to Neutral from Buy and removed Crown Holdings Inc. (NYSE: CCK) from its Americas Conviction Buy List.
  
• UBS downgraded Atlantic Tele-Network Inc. (NASDAQ: ATNI) to Neutral from Buy.

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In my series on the top 25 stocks for the NEXT 25 years, I recommended Chipotle (NYSE: CMG) as one of the picks. The stock was at $82 per share on May 21 when I wrote about the company. The $82 price represented a market capitalization of $2.6 billion. Today the stock is at $114.65 with a market cap of $3.7 billion, up over 40% for investors who bought the stock.

But, I have to admit that short-term I am nervous about Chipotle. I still believe the concept is becoming the new rave in the fast food service sector. I still believe that Chipotle could take on McDonald's-like proportions in the years to come -- but I am nervous about the short-term prospects. Why?

I have two reasons. First, higher commodity prices: The price of wheat and dairy has gone up in the United States, which, I believe, could affect Chipotle's pricing structure and general margins. In this consumer-wary environment, restaurants are not about to raise menu prices and risk losing customers. Therefore, I think the food cost expenses for Chipotle's (and many other fast food chains) are going up and will stay high for a while. The second reason I am nervous is Chipotle is a domestic company with no international sales. It is purely reliant on American diners for its revenues.

Large operators like Starbucks (NASDAQ: SBUX) and McDonald's (NYSE: MCD) are expanding internationally where the weak dollar will benefit their earnings. The growth that international markets provide is evergreen, but the domestic marketplace and market share must be established and fortified first. Chipotle is not there yet.

Chipotle has been an excellent performer since I wrote the article back in May and, as I said, long term it will be a dominant player. The short-term issue is that the stock is "priced for perfection." This company has put up superb earnings growth, exceeding analysts expectations consistently. With higher commodity prices, the ability to exceed expectations is significantly reduced. Now the victory may be just in "hitting expectations." My estimates for the quarter ending September 30, 2007 is for revenues of $280 million and earnings per share of 27 cents. With lower commodity prices, I would think Chipotle could hit 30-31 cents, thus exceeding the 27-cent estimate. But in this environment, I would be very happy with 27 cents. If this happens, the stock could sell off 10-20%.

So just to be clear, it is still a top 25 stock for the NEXT 25 years, but I am stepping aside for the next couple of quarters. I still estimate revenues for 2008 at $1.32 billion and earnings per share of $2.50 representing a 30% growth rate over 2007. With a price-to-earnings (PE) of 45 times next year's estimates, Chipotle is a bit too expensive. If the stock comes back to the $90-95 price level and it has reported the September quarterly results, I will re-visit the name and keep you posted.

Georges Yared is the CIO of Yared Investment Research and the author of Baby Boomer Investing...Where do we go from here?

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