CAVA Earnings Preview: Shares face high expectations
2min read CAVA Group (CAVA) is set to report Q3 earnings on November 12, with analysts expecting EPS of $0.11 and revenue of $233.05 million, marking an anticipated 33% year-over-year revenue growth. Same-store sales are expected to rise around 12%, a slight deceleration from Q2’s 14.4% growth but still robust for the Mediterranean fast-casual chain. Key metrics to watch include guest traffic and average check size, as CAVA’s focus on a healthy, Mediterranean-inspired menu has resonated with consumers seeking fast-casual dining options.
Investors will be watching for management’s commentary on the competitive landscape, especially after Chipotle (CMG) recently invested in Brassica, a smaller Mediterranean concept. Although Brassica has only six locations, Chipotle’s backing could accelerate its growth, potentially adding pressure on CAVA. However, this move also validates the growing appeal of Mediterranean fast-casual dining, a trend CAVA has been capitalizing on as a market leader in this category.
CAVA’s recent menu innovations, including the successful launch of grilled steak, have contributed to strong customer retention and traffic growth. Analysts are also optimistic about CAVA’s potential for long-term unit growth, as it continues expanding into new markets, such as Chicago, which recently became one of its best-performing regions. Additionally, CAVA’s digital and loyalty initiatives may drive further customer engagement, helping to sustain its high single-digit to mid-single-digit same-store sales growth expectations.
While CAVA’s stock has rallied significantly year-to-date, with a high valuation, some analysts suggest that the recent gains may limit near-term upside. However, CAVA’s raised FY24 guidance for adjusted EBITDA and new unit openings signals confidence in sustained growth. Investors will be looking for an update on holiday season expectations and management’s strategic initiatives to support profitability, as these factors will influence CAVA’s growth narrative going forward.
CAVA Group reported strong Q2 results, with EPS of $0.17 surpassing the $0.12 consensus, while revenue of $233.5 million outperformed estimates of $219.5 million, marking a 35% year-over-year growth. The company’s 14.4% comparable sales growth notably beat the 7.4% expectation, driven by a 9.5% increase in guest counts and a 4.9% rise in average check size. CAVA also raised its FY24 guidance across several metrics, including adjusted EBITDA, which is now expected between $109 million and $114 million, and comp growth at 8.5-9.5%, reflecting confidence in continued momentum.
Analysts responded positively, with Wedbush raising its price target from $100 to $120, viewing CAVA as a rare restaurant brand with sustainable long-term transaction growth. CAVA’s restaurant-level EBITDA margin of 26.7% beat expectations, attributed to sales leverage, while new openings are on track, with guidance for 54-57 new locations in FY24, up from 50-54 previously. CAVA’s recent menu addition of grilled steak has been a standout, exceeding internal forecasts and reinforcing its value proposition amid rising prices at traditional fast-food chains.
The stock surged 8.7% after the release, reflecting investor confidence in CAVA’s growth potential, with analysts highlighting its appeal to cost-conscious consumers and robust market expansion, including successful entry into Chicago. As full-service and fast-food chains struggle with pricing challenges, CAVA’s value-driven approach and menu innovation position it favorably within the fast-casual segment, securing it as a preferred choice in a competitive environment.
Shares of CAVA have enjoyed an impressive run since its IPO. The company is coming off an impressive Q2 report. Together, this puts a lot of pressure on CAVA to top expectations if it wants to drive shares higher. We would prefer to sit this one out and see if we can not find a pullback to the $120-125 area for a better entry.