Cava Group Insider Sold Shares Worth $2,133,450, According to a Recent SEC Filing

The U.S. restaurant industry has grown at a solid pace over the past couple of years even though prices posed a major challenge for both consumers and operators. Higher personal income and spending have been the major factors driving sales amid inflationary pressures.

Last week, the Commerce Department reported that restaurant sales grew at a solid pace in October, and is on track to end the year on a high.

Given the positive outlook, investing in restaurant stocks, such as CAVA Group, Inc. CAVA, Dutch Bros Inc. BROS, Shake Shack Inc. SHAK, Brinker International, Inc. EAT and Kura Sushi USA, Inc. KRUS will be a prudent choice. These stocks have seen positive earnings estimate revisions in the last 60 days. Each of our picks carries a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Restaurant Sales Grow in October

The Commerce Department said last week that sales at U.S. bars and restaurants totaled $97.3 billion in October, up 0.3% month over month, after increasing 1.2% in September. On a year-over-year basis, sales at restaurants grew 4.2% in October.

For the 10 months through October, sales totaled $495.4 billion. Sales have grown faster than the rise in food inflation. According to the Labor Department, the consumer price index for food away from home rose 3.8% year over year in October, which suggests that only part of the rise in sales can be attributed to higher prices on the menu.

Inflation posed a major challenge over the past couple of years and is still above the Federal Reserve’s 2% target. However, sales growth surpassed price increases during the entire phase of high inflation. Monthly sales at restaurants have jumped 41% since February 2020, the pre-pandemic era.

Restaurant Stocks to Benefit

Rising prices have posed challenges for restaurant owners as cost-conscious customers prioritize value for money. Quick-service restaurants, especially those focused on affordability, have managed to stay strong in this tough market.

As budget-conscious diners seek economical dining options, competition in the value-driven segment has grown significantly. To attract and retain customers, brands are ramping up their promotions and rolling out money-saving deals.

Industry stakeholders are benefiting from steady demand for budget-friendly offerings and competitive pricing strategies. Many restaurants are leveraging promotional efforts, forming strategic partnerships, and launching new products to maintain customer interest.

According to the National Restaurant Association, sales at U.S. restaurants are projected to surpass $1.1 trillion in 2024. The Federal Reserve cut interest rates by 75 basis points since September after inflation declined sharply over the past year. With price pressures subsiding, the restaurant industry is poised to gain in the near future, as reduced borrowing rates are expected to benefit both restaurant owners and customers.

5 Restaurant Stocks With Upside

CAVA Group, Inc.

CAVA Group, Inc. is a category-defining Mediterranean fast-casual restaurant brand, which brings heart, health and humanity to food. CAVA is based in Washington.

CAVA Group’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 16.3% over the past 60 days. CAVA currently has a Zacks Rank #2.

Dutch Bros Inc.

Dutch Bros Inc. is an operator and franchisor of drive-thru shops that focus on serving high-quality, hand-crafted beverages with unparalleled speed and superior service.

Dutch Bros’ expected earnings growth rate for the current year is 50%. The Zacks Consensus Estimate for current-year earnings has improved 15.4% over the past 60 days. BROS presently carries a Zacks Rank #2.

Shake Shack Inc.

Shake Shack Inc. restaurants operate in the United States and internationally. SHAK operates and grants licenses for Shake Shack restaurants, commonly known as Shacks. Here, Shake Shackpresents a menu featuring burgers, chicken, hot dogs, crinkle-cut fries, shakes, frozen custard, beer, wine and additional offerings.

Shake Shack’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 12.3% over the past 60 days. SHAK currently has a Zacks Rank #2.

Brinker International, Inc.

Brinker International, Inc. primarily owns, operates, develops and franchises various restaurants under the Chili’s Grill & Bar and Maggiano’s Little Italy brands. EAT took over Chili’s, Inc., a Texas corporation, in September 1983 and completed the acquisition of Maggiano’s in August 1995. Chili’s is a preeminent leader in the bar & grill category of casual dining. The brand has been functioning for over the last 40 years.

Brinker International’s expected earnings growth rate for the current year is 34.6%. The Zacks Consensus Estimate for current-year earnings has improved 19% over the past 60 days. EAT currently sports a Zacks Rank #1.

Kura Sushi USA, Inc.

Kura Sushi USA, Inc. operates as a restaurant. KRUS offers nigiri, roll, hand roll, gunkan and desserts. Kura Sushi USA Inc. is based in Irvine.

Kura Sushi USA’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved more than 100% over the past 60 days. Currently, KRUS carries a Zacks Rank #1.

Zacks Investment Research

Top Wall Street analysts changed their outlook on these top names. For a complete view of all analyst rating changes, including upgrades and downgrades, please see our analyst ratings page.

• Compass Point analyst Dominick Gabriele initiated coverage on Fiserv, Inc. with a Buy rating and announced a price target of $278. Fiserv shares closed at $215.12 on Tuesday. See how other analysts view this stock.
• Bernstein initiated coverage on CAVA Group, Inc. with a Market Perform rating and announced a price target of $145. Cava Group shares closed at $141.25 on Tuesday. See how other analysts view this stock.
• Compass Point analyst Dominick Gabriele initiated coverage on Toast, Inc. with a Buy rating and announced a price target of $49. Toast shares closed at $42.50 on Tuesday. See how other analysts view this stock.
• JP Morgan analyst Samik Chatterjee initiated coverage on Ingram Micro Holding Corporation I with a Neutral rating and announced a price target of $28. Ingram Micro shares closed at $22.78 on Tuesday. See how other analysts view this stock.
• Piper Sandler analyst James Callahan initiated coverage on AppLovin Corporation with an Overweight rating and announced a price target of $400. AppLovin shares closed at $321.19 on Tuesday. See how other analysts view this stock.

Considering buying APP stock? Here’s what analysts think:

Read More:

• Wall Street’s Most Accurate Analysts Weigh In On 3 Defensive Stocks With Over 5% Dividend Yields

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CAVA Group, Inc. CAVA reported robust third-quarter 2024 results on Nov. 13. Its growing dominance in the Mediterranean dining space aided the third-quarter performance.

The company has positioned itself as a leader in this emerging cuisine category, leveraging its unique value proposition to resonate with a broad audience. This momentum reflects CAVA's ability to redefine cultural dining trends and establish Mediterranean cuisine as a major player in the restaurant industry.

Major Takeaways From Q3 Earnings

Earnings & Revenues Beat Estimates: The company reported third-quarter 2024 earnings per share of 15 cents, beating the Zacks Consensus Estimate of 11 cents. In the prior-year quarter, it had reported adjusted earnings of 6 cents. CAVA’s revenues were $243.8 million, surpassing the consensus estimate of $235 million and increasing 38.9% year over year.

Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

Traffic & Comps Rise in Q3: The company’s results were aided by robust year-over-year traffic and same-restaurant sales growth. In third-quarter 2024, same-restaurant sales increased 18.1%, including guest traffic growth of 12.9%, and a 5.2% jump in menu prices and product mix.

Unit Expansion Solid: CAVA added 11 net new restaurants in the quarter, bringing the total to 352, marking a 21.4% year-over-year increase. The company continues to see strong performance from its new restaurant class, boosting confidence in its scalability.

Guidance for 2024 Raised: Following the robust third-quarter 2024 results, the company raised its guidance for the year. It expects 56-58 net new restaurant openings, up from the prior mentioned 54-57. The company anticipates CAVA same-restaurant sales growth of 12-13%, up from the earlier stated 8.5-9.5%. The restaurant-level profit margin is expected between 24.5% and 25.0% compared with the previously mentioned 24.2-24.7%.

Other Factors Aiding CAVA

The company has been benefiting from menu innovation. The introduction of the latest offerings like Garlic Ranch pita chips and the national rollout of steak has been well-received, driving incremental sales and brand engagement.

Garlic Ranch pita chips have become a social media sensation, amassing more than 12 million impressions across various platforms and generating an additional 347 million earned media impressions. Additionally, the nationwide launch of its steak offering more than four months ago continues to demonstrate strong engagement. These initiatives have significantly bolstered brand awareness, which has increased 8 percentage points since the IPO and continues growing with each product launch.

CAVA is leveraging AI-driven kitchen technologies to improve ingredient management, order accuracy and operational efficiency. Early tests in select locations show promising results. The newly launched loyalty rewards program has boosted customer engagement, with loyalty sales as a percentage of revenues growing 200 basis points.

The company announced plans to expand into new markets, such as South Florida and additional Midwest locations, with its 2025 pipeline reflecting at least 17% unit growth. The brand continues to capitalize on the rising popularity of Mediterranean cuisine, emphasizing its unique value proposition of health, bold flavors and genuine hospitality.

CAVA’s Price Performance & Valuation

The CAVA stock has surged 80.6% over the past six months, significantly outperforming its industry peers and the broader market. The industry has rallied 8% and the S&P 500 rose 10.5%. CAVA's strong momentum shows its continued ability to fire on all cylinders.

CAVA has outpaced industry players like Chipotle Mexican Grill, Inc.’s CMG 7.4% dip, Domino's Pizza, Inc.’s DPZ 14.4% decline and Restaurant Brands International Inc.’s QSR 0.7% gain in the past six months.

Stock Price Performance

CAVA is currently valued at a premium compared with its industry on a forward 12-month P/S basis. The company’s forward 12-month price-to-sales ratio stands at 13.81, significantly higher than the industry’s 3.98 and the S&P 500's 5.17.

P/S (F12M)

Estimate Revision Favoring the Stock

Reflecting the positive sentiment around CAVA, the Zacks Consensus Estimate for earnings per share has seen upward revisions. In the past 7 days, analysts have increased their estimates for the current and next fiscal years by 11.1% to 50 cents and 13% to 61 cents, indicating year-over-year growth rates of 138.1% and 22.9%, respectively.

Conclusion

CAVA's impressive third-quarter 2024 performance highlights its strong positioning in the growing Mediterranean dining space. The company's ability to innovate with menu offerings, expand into new markets and leverage technology for operational efficiency underscores its growth potential. With a scalable model and increasing popularity for its cuisine, the Zacks Rank #2 (Buy) company is well-positioned for sustained momentum, making it an attractive investment opportunity for those seeking exposure to a dynamic and expanding segment of the restaurant industry.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Zacks Investment Research

Dutch Bros Inc. is a thriving drive-thru coffee shop operator and franchisor operating 950 shops across 18 states. While primarily focused on coffee drinks, they also offer teas, smoothies, protein and energy drinks. They prioritize speed and efficiency with an app-driven, drive-thru-focused operating model catering to the on-the-go lifestyles of their customers.

The company reported 29% YoY revenue growth and 2.7% YoY same-store sales (SSS) growth in its third quarter of 2024. The most impressive statistic is the average unit volume (AUV) of $2 million in sales generated within the confines of 950 square feet, which is the average size per shop.

The retail/wholesale sector company competes with Starbucks Co. and Luckin Coffee Inc. (OTCMKTS: LKNCY ). Starbucks had 40,199 stores (52% company-owned and 48% licensed) at the end of its fiscal Q4 2024, adding 722 net new stores. Dutch Bros plans to add 150 stores in 2024.

Growing the Culture and Management From Within

Like CAVA Group Inc. , Dutch Bros also has a promote-from-within philosophy as they map out the 6 steps to working your way up to a regional operator from Broista. They have 400 operator candidates with an average tenure of more than seven years. Each person in the pipeline is ready to be activated as a market operator. Dutch Bros received over 400,000 applications annually for 11,000 open field positions.

Impressive Q3 Results Indicating Growth In Every Metric

Dutch Bros reported Q3 2024 EPS of 16 cents, beating consensus estimates by 4 cents. Revenue rose 27.9% YoY to $338.2 million, firmly beating $324.97 million consensus estimates. System same-shop sales (SSS) rose 2.7% YoY, and transactions rose 0.8% YoY. Company-operated SSS rose 4% YoY, and transactions grew 2.4%. Dutch Bros opened 38 news shops, including 33 company-operated across 11 states. Company-operated shop gross profit rose to $68.4 million, up from $57 million last year.

Loyalty Program Hitting Records

The Dutch Rewards loyalty program saw the largest number of sign-ups since its launch, with over 1 million thanks to the rollout of its mobile ordering, of which 858 shops have enabled. In Q3, over 67% of total transactions were from Dutch Rewards members. Mobile orders make up 7% of total revenue, leaving much room for growth.

Dutch Bros Raises 2024 Guidance

For the full year 2024, Dutch Bros raised its revenue guidance to $1.255 billion to $1.260 billion, up from previous guidance of $1.215 billion to $1.230 billion, versus $1.23 billion consensus estimates. SSS growth is expected to be around 4.25% YoY, up from low single digits, and SSS growth for Q4 is expected to be between 1% and 2%. The total number of system shop openings in 2024 is expected to be around 150.

Food Is the Next Growth Driver

Dutch Bros sells a very limited number of food items. By limited, we mean four items to be exact: chocolate chip muffin tops, lemon poppyseed muffin tops, orange cranberry muffin tops and granola bars. Just as Starbucks instituted snacks and hot breakfast items to bolster their food sales, Dutch Bros has been experimenting with expanded bakery and sweet and savory hot food items in six shops in Q3. The initial response has been excellent, and the company is looking to roll out more food items in 2026.

Dutch Bros CEO Christine Barone commented, “Based on the early results, it is likely a more robust food venue will play a role for Dutch Bros in the future, and we will continue our testing in the coming quarters. With food making up less than 2% of our sales right now, we clearly see the opportunity.”

BROS Forms a Daily Pennant Pattern

A pennant pattern is a combination of a flagpole representing a parabolic price surge and a symmetrical triangle pattern at the peak comprised of a descending upper trendline and an ascending lower trendline converging at the apex point. A breakout occurs when the stock surges above the upper trendline, and a breakdown occurs if the stock falls below the lower trendline.

BROS formed the daily pennant after peaking at $50.24 following its Q3 earnings beat. The pennant is comprised of lower highs illustrated by the descending upper trendline and higher lows indicated by the ascending lower trendline. The daily anchored VWAP support is at $44.72. The daily RSI has been holding above the 70-band since the earnings price gap. Earnings price gap fill levels are at $43.50 and $35.40. Fibonacci (Fib) pullback support levels are at $43.50, $39.06, $35.40, and $32.08.

BROS’s average consensus price target is $47.30, implying a 1.4% upside and its highest analyst price target is $55.00. Eight analysts have Buy ratings, and three have Hold ratings on the stock. The stock has a 10.79% short interest.

Actionable Options Strategies: Bullish options investors can buy BROS stock on a deeper pullback using cash-secured puts at the gap fill and Fib pullback support levels.