Cava Group (CAVA) stock jumped more than 16% out of the gate Wednesday after the fast-casual Mediterranean restaurant chain beat top- and bottom-line expectations for its third quarter and raised its full-year outlook.
In the 12 weeks ended October 6, Cava's revenue increased 39% year over year to $243.8 million, driven by new restaurant openings and an 18.1% jump in same-restaurant sales. Its earnings per share improved 150% from the year-ago period to 15 cents.
"Our third quarter results demonstrate the strength of our Mediterranean category-defining brand and the broad appeal of our unique value proposition, creating what is quickly becoming the next major cultural cuisine category," said Cava CEO Brett Schulman in a statement. "Third quarter traffic grew 12.9%, we opened 11 net new restaurants and, driven by the power of our unit economic engine, we generated average unit volume of $2.8 million."
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The results easily beat analysts' expectations. Wall Street was anticipating revenue of $234 million and earnings of 11 cents per share, according to CNBC.
As a result of its strong performance in the first nine months of the year, Cava raised its full-year outlook. Here's what the company now expects to achieve:
| Metric | New outlook | Previous outlook |
|---|---|---|
| Net new restaurant openings | 56 to 58 | 54 to 57 |
| Same-restaurant sales growth | 12% to 13% | 8.5% to 9.5% |
| Restaurant-level profit margin | 24.5% to 25% | 24.2% to 24.7% |
| Adjusted EBITDA | $121 million to $126 million | $109 million to $114 million |
Is CAVA stock a buy, sell or hold?
Cava Group has been red hot on the price charts in 2024, nearly quadrupling in value for the year to date. Unsurprisingly, analysts are bullish on the consumer discretionary stock. According to S&P Global Market Intelligence, the consensus recommendation among analysts it tracks is a Buy.
However, analysts' price targets have not been able to keep up with the rally in the large-cap stock. Indeed, the average price target of $142.25 represents a steep discount to current levels. Analysts may very well raise their price targets in the days and weeks ahead following CAVA's beat-and-raise quarter.
Financial services firm Wedbush is one of the firms raising their price target on the stock after earnings, to a Street-high $190 from $155, while maintaining its Outperform (Buy) rating.
"We view CAVA as one of a handful of publicly traded restaurants positioned to deliver positive annual transaction growth over the longer-term, with realistic long-term revenue and unit growth targets," says Wedbush analyst Nick Setyan. "With improved near- and medium-term visibility, we also continue to view current 2024 and 2025 same-store sales growth and EBITDA [earnings before interest, taxes, depreciation and amortization] expectations as conservative."
Related Content
-
Winning Strategies for Financial Advisers as Clients' Lives EvolveHow can the wealth management industry help make life transitions easier for the adviser and the client?
-
How Advisers Can Establish Relationships With HNW ProspectsThese strategies can help to build influence with high-net-worth individuals, who are often looking to an adviser for insight rather than solutions.
-
Winning Strategies for Financial Advisers as Clients' Lives EvolveHow can the wealth management industry help make life transitions easier for the adviser and the client?
-
How Advisers Can Establish Relationships With HNW ProspectsThese strategies can help to build influence with high-net-worth individuals, who are often looking to an adviser for insight rather than solutions.
-
When Your Car Is Fixed, But You've Still Got the ProblemThis reader's experience with trying to get squealing brakes fixed under an extended warranty mirrors what others are experiencing these days.
-
Stock Market Today: Dow Rises 854 Points From Its Intraday LowIf there's one thing markets hate, it's uncertainty. But uncertainty is all they're getting these days.
-
Seven Questions to Ask When Evaluating Personal Loan OptionsTaking out a personal loan too hastily could lock you into unfavorable terms with an untrustworthy lender. Ask these questions before signing anything.
-
How Much Does Being Rich Matter in Retirement?After a certain point, having more money in retirement won't make you any happier, new research shows. Instead, physical health, a sense of purpose, and a minimal amount of non-mortgage debt are more relevant.
-
The Three Biggest Fears Keeping Retirees Up at NightHere are the steps you can take to put those fears to rest and retire with confidence so you can relax and enjoy the life you've planned.
-
What Can a Donor-Advised Fund Do for You? (A Lot)DAFs and private foundations go about helping charities (and those who donate) in different ways. Each comes with its own benefits and restrictions to navigate.
