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May 29, 2024

Cava Grill (CAVA) Reports. FTAI Aviation (FTAI) Update

Cava Grill (CAVA) Reports. FTAI Aviation (FTAI) Update

Shares of Cava Grill (CAVA) are trading up modestly (down earlier) after delivering a very nice quarterly result following yesterday’s close. The growth story remains intact and shares are attractive even after rising materially year-to-date and by more than 30% since we jumped in just six weeks ago.

Turning to the numbers, Q1 revenue rose 27.5% to $259 million (beating by $13 million or 5.3%) while EPS of $0.12 improved from -$0.02 in Q1 last year and beat by $0.08. Management raised full-year guidance on just about everything that matters, including new stores (50-54, up from 48-52 previously), same-store sales growth (4.5% - 6.5%, up from 3% - 5% previously) and adjusted EBITDA ($100 - $105 million, up from $86 - $92 million previously).

Listening to the conference call, management sounds very pragmatic and disciplined regarding their growth strategy and a national steak rollout should refresh the menu a little. Continued focus on both employee and customer satisfaction and a brand and menu that continue to resonate in the market suggest CAVA has more upside ahead. Keeping at buy. BUY HALF

FTAI Aviation (FTAI) is trading uncharacteristically lower today after pricing a $171.4 million (roughly 2.1 million shares) secondary offering last night by selling shareholder FIG LLC. The implied price per share is $82 (FTAI is trading near 78.5 midday today). This news comes right after an announcement that FTAI will move its outsourced management and advisory operations from FIG LLC back in-house. The cost to terminate this agreement is 1.9 million shares and $150 million in cash, and management says it will save $30 million this year and a lot more as time goes on (no profit sharing moving forward). This amounts to a lot of back-office-type changes but doesn’t change anything about what the business does. I suspect shares will trade down for a couple of days as the secondary offering flows through; then the stock will firm up. A number of analysts increased their price target following news of operations coming in-house. I am not concerned about the stock and think it’s OK to buy the dip. BUY

Tyler Laundon is chief analyst of the limited-subscription advisory, Cabot Small-Cap Confidential and grand slam advisory Cabot Early Opportunities. He has spent his entire career managing, consulting and analyzing start-up and small-cap companies. His hands-on experience has taught Tyler that the development of a superior business model is the biggest factor in determining a company’s long-term success. Accordingly, his research focuses on assessing the viability of management’s growth strategies, trends in addressable markets and achievement of major developmental milestones.