CAVA Group, Inc. CAVA is slated to release third-quarter 2024 results on Nov. 12, after the closing bell.
In the last reported quarter, the company’s earnings beat the Zacks Consensus Estimate by 30.58%. CAVA surpassed earnings estimates in the trailing four quarters. The average surprise in this period is 257.7%, as shown in the chart below.
Image Source: Zacks Investment Research
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CAVA’s Q3 Estimate Revisions
The Zacks Consensus Estimate for third-quarter earnings per share (EPS) has been unchanged at 11 cents in the past 7 days. The projected figure indicates a surge of 83.3% from the year-ago reported EPS of 9 cents. The consensus mark for revenues is pegged at $235.1 million, implying 33.9% year-over-year growth.
What the Zacks Model Unveils for CAVA
Our proven model predicts an earnings beat for CAVA this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.
CAVA’s Earnings ESP: CAVA currently has an Earnings ESP of +3.38%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank of CAVA: The company carries a Zacks Rank #2 at present.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors Influencing CAVA’s Q3 Performance
CAVA’s third-quarter 2024 performance is likely to have been aided by continued expansion efforts. It also expanded into new markets like Chicago, which is its strongest market entry. Additionally, the company’s average unit volumes (AUV) have been on a solid growth trajectory, reinforcing its expansion strategy. Its focus on providing high-quality, Mediterranean-inspired meals at competitive prices bodes well.
CAVA's recent introduction of grilled steak has been a popular addition, resonating with new and existing customers, and boosting sales. This addition aligns with its goal of enhancing customer choice while solidifying its value proposition, which combines quality, health-conscious options and competitive pricing. The consensus estimate for CAVA’s same-restaurant sales is pegged at year-over-year growth of 12.6%.
Operationally, CAVA has been leveraging technology to improve efficiency, such as the ongoing Connected Kitchen initiative, which integrates AI-driven tools to streamline food preparation and monitor ingredient levels. Its pilot AI video technology and optimized labor deployment model are designed to increase order accuracy, service speed and quality. These innovations are likely to have boosted margins in the quarter under review.
Price Performance & Valuation of CAVA
The CAVA stock has surged 86.6% over the past six months, significantly outperforming its industry peers and the broader market. In the same time frame, other industry players like Chipotle Mexican Grill, Inc. CMG, Domino's Pizza, Inc. DPZ and Restaurant Brands International Inc. QSR have declined 10%, 13.3% and 6.8%, respectively.
Price Performance
Image Source: Zacks Investment Research
Let us assess the value CAVA offers to investors at its current levels.
The company is currently valued at a premium compared with its industry on a forward 12-month P/S basis. Its forward 12-month price-to-sales ratio stands at 14.47, significantly higher than the industry and the S&P 500's 5.24.
P/S (F12M)
Image Source: Zacks Investment Research
Investment Thoughts for CAVA
CAVA presents a compelling investment opportunity ahead of its third-quarter 2024 earnings release, backed by its consistent growth trajectory and strategic initiatives. The company has consistently outperformed earnings expectations, underscoring its operational strength and resilience. CAVA's expansion into high-potential markets like Chicago, along with a rising AUV, supports strong top-line growth. Technological advancements through the Connected Kitchen initiative and AI-driven operational enhancements are likely to boost margins and improve service quality, driving efficiency and customer satisfaction. While trading at a premium, CAVA’s rapid growth and competitive edge make it an attractive buy for investors seeking robust returns.
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CAVA Group, Inc. (CAVA) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
