Cava Group, a fast-casual Mediterranean restaurant chain, surpassed expectations with its Q2 earnings report released late Thursday, resulting in a significant rise in CAVA stock to a new record high on Friday.
The company announced adjusted earnings of 17 cents per share, exceeding analysts’ forecasts of 13 cents. Revenue surged by 35% to reach $231.4 million, outperforming the anticipated $219.5 million.
This announcement marks Cava’s first decline in earnings over the past six quarters. Same-restaurant sales rose by 14.4%, a slight decrease from last year’s 18.2% growth, yet still outperforming the expected increase of 8.2%.
CEO Brett Schulman highlighted in the report that customer traffic increased by 9.5% and that the company added 18 new locations during the quarter.
Cava slightly adjusted its guidance upwards, now predicting same-restaurant sales growth of 8.5% to 9.5% for 2024, compared to the previous forecast of 4.5% to 6.5%. The company anticipates adjusted EBITDA between $109 million and $114 million, an increase from prior projections of $100 million to $105 million.
Additionally, Cava plans to open 54 to 57 new restaurants, up from its earlier goal of 50 to 54, and expects restaurant-level profit margins to range from 24.2% to 24.7%. Earlier in May, it had estimated profit margins of 23.7% to 24.3%.
Analysts at Stifel predicted another strong quarter for same-restaurant sales and new store performance. Their review indicated a sequential improvement in Cava’s traffic compared to Q1, suggesting that the sales momentum could be sustainable. They believe Q2 results will showcase an “organic flywheel effect,” driven by the brand’s growing recognition and unit expansion.
As a result, Stifel raised its price target for CAVA stock from 90 to 110 while maintaining a buy rating.
CAVA stock rose by more than 14% early Friday, reaching new heights, after ending down 0.9% on Thursday, just shy of Wednesday’s record high of 102.90.
The shares are currently trading near the upper limit of a buy zone within a cup base, having broken out above the buy point of 98.69 on August 16. The buy zone extends 5% beyond this point, targeting a maximum of 103.62.
Cava Group is a leader in the Retail-Restaurants Group according to IBD Stock Checkup and has seen its stock price soar by 137% year-to-date as of Thursday’s close.