CAVA Group, Inc. CAVA is slated to release second-quarter 2024 financial numbers on Aug 22, after the closing bell.
In the last reported quarter, the company’s earnings beat the Zacks Consensus Estimate by 200%. CAVA surpassed earnings in all of the trailing four quarters, the surprise being 450%, on average.
The Trend in Estimate Revision
The Zacks Consensus Estimate for second-quarter earnings per share (EPS) has remained flat at 12 cents. The estimated figure indicates a 42.9% decline from the year-ago EPS of 21 cents. However, the consensus mark for revenues is pegged at $220.6 million, indicating 27.6% year-over-year growth.
What the Zacks Model Unveils
Our proven model doesn't conclusively predict an earnings beat for CAVA Group 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.
Earnings ESP: The company has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: The company carries a Zacks Rank #3 (Hold) at present.
CAVA Group, Inc. Price and EPS Surprise
CAVA Group, Inc. price-eps-surprise | CAVA Group, Inc. Quote
Factors Influencing Q2 Performance
The company’s performance is likely to be aided by strategic initiatives such as the nationwide introduction of premium-priced steak and a revamped loyalty program. Menu price increases, robust digitalization, a favorable product mix and new restaurant openings continue to drive growth. Its performance is also likely to have been aided by robust visitation. CAVA is committed to maintaining high standards of restaurant operations, ensuring excellence at every location and during every shift, which is aiding the company.
The company's emphasis on category-defining brands and highly-differentiated product offerings bolstered growth prospects to some extent. A sequential improvement in visitation is likely to have driven the top line. The Zacks Consensus Estimate for CAVA Group’s restaurant sales is pegged at $218.4 million, suggesting an increase of 25.7% year over year. The consensus mark for CAVA’s same restaurant sales is pegged at growth of 7.2% year over year.
However, increases in food, beverage and packaging expenses, along with labor inflation due to higher average hourly wages, are likely to have negatively impacted the bottom line. Commodity inflation is also likely to have been an overhang.
Price Performance & Valuation
This year, CAVA stock has outperformed the industry and the S&P 500. Year to date, the stock has skyrocketed 133.1% against the industry’s decline of 2.4%. However, other major players have also seen declines — Darden Restaurants, Inc. DRI is down 8.9%, McDonald's Corporation MCD is down 3% and Restaurant Brands International Inc. QSR is down 8.4%.
Image Source: Zacks Investment Research
The company is currently valued at a premium compared with the industry on a forward 12-month P/S basis. CAVA’s forward 12-month price-to-sales ratio stands at 11.18, significantly higher than the industry’s ratio of 3.79 and the S&P 500's ratio of 5.28. This suggests that investors might be paying a high price relative to the company's expected earnings growth.
Image Source: Zacks Investment Research
Investment Thoughts
For existing shareholders, holding onto the CAVA stock is a prudent choice, given the company’s strong market position, strategic growth initiatives and impressive earnings record. The company’s robust growth, enhanced by technological advancements and a focus on customer experience, bodes well. However, potential new investors might want to wait for a pullback or a more attractive valuation before initiating a position, as the current premium pricing and potential cost pressures could limit near-term gains.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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McDonald's Corporation (MCD) : Free Stock Analysis Report
Darden Restaurants, Inc. (DRI) : Free Stock Analysis Report
Restaurant Brands International Inc. (QSR) : Free Stock Analysis Report
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.
