CAVA Soars After Earnings, EAT Taps Record Highs & Setting Table for Options Trade

invest smarter with Schwab. We're back on morning trade live. I'm Sam Bardis. Let's go inside out on a couple of these earnings report from Carver and Brinker International. Joining us now is Caleb Silver editor in chief over at Investopedia. Caleb good morning to you. Let's start to Carver with Carver in this reaction because it doesn't look like a bad batch of lettuce and explosive. You know what has managed to impact things here. Just walk us through your thoughts. Yeah. Very strong in the stocks. Up 12% already out of the gate this morning on pretty strong earnings results. Better than expected in a lot of ways. Really strong revenue growth up 31% in the second quarter. A lot of people were concerned that the Cyclospora outbreak and tariffs and everything might weigh on it. It did not seem to do so. 9% same store sales growth in line, but still really strong. When you think about the fact that everyone's concerned about the consumer and resiliency and spending out in restaurants and the rising food prices, this is a very good report. The CEO saying this morning that the consumer remains pretty resilient and restaurant level margins 25% plus. That's really strong for any restaurant. Restaurant margins are notoriously thin. Finding a way to really make the most out of them and not that impacted by the the Cyclospora outbreak, any of the lettuce recalls. They don't do a lot of sourcing of their vegetables and produce from Mexico, so they were in decent shape on that. All right. Interesting because I'm just looking at the stock, obviously a nice report here. When you look at it compared to, say, a Sweetgreen, which we know has been impacted by some of that, a Shake Shack, for instance, Chipotle, I mean year to date, these names are all down in double digits. However Carver is up like what, 18% or so? I mean, what is it doing that the others aren't? Do you think Caleb? Yeah. Well, it's also coming back from a pretty steep decline in its share price that it hit higher highs much, much higher highs last year. So it's on its way back. But what is it doing. It's opening restaurants and it's finding ways to squeeze profit margins good profit margins out of those restaurants by having a pretty strong but also flexible menu and giving its customers a lot of different options. When the Cyclospora outbreak really was in full swing. They have a lot of options that have zero sort of shredded lettuce or any of that type of produce in there. You could you could sort of move over to different types of food groups there at their restaurant. So that was a big deal for them. Plus, every time they open a restaurant, it seems like they're able to make it profitable. 17 net new restaurants in the second quarter. They now have 476 locations that are on track to open some 75 to 77 new restaurants this year. So they're finding the magic right now and finding the sweet spot in the right cities to open. Let's switch over to Brinker International. Obviously a very different type of business, but still obviously giving us a good read on the consumer as far as what they're doing. A bit more of a mixed performance on this, but great reaction. And this has had a tremendous run year to date as well. What did you make of the report. Yeah pretty good. The stock's up some 5% but most people don't know if Brinker's but they probably know of Chili's. They pass them in airports all the time or in many major malls and major cities. So Chili's is what it's known for. It also owns the the Italian family restaurant as well. Maggiano's Chili's performing much better. Five straight years of sort of a turnaround at Chili's, bringing that that company back sort of from the heels here and that that even though they're a little bit more impacted from the Cyclospora outbreak and mentioning it on the call and in the earnings report, not that bad. There's a lot, a lot of sort of hesitancy on the part of the consumer and sort of the last part of the quarter, but then it sort of picked up again. So they're continuing the turnaround at Chili's. That's reflected in the share price. The other restaurant is suffering is not doing as well. I don't know if we'll see that in a year if that's still a part of the portfolio, but they are having some success. And also noting that the consumer remains resilient. And this again, is sort of faster casual sit down though Chili's bigger menu items, bigger menu prices than a kava. Yeah, I wouldn't know. And as my producer just reminded me, everyone but me, because I admittedly have never been to any of these restaurants, but I could always go a spicy marg, particularly at 10:00 in the morning. I'm just wondering, though, it's such a fascinating exercise in, you know, American consumer psychology, isn't it? The fact that, you know, you read some of these consumer sentiment surveys, yet people are still going out and spending. I mean, this stock is also up what, like over the last five years, over 330%. I mean, it's had a very, very nice run an all time high today at 236 bucks here. You mentioned the chili comps. I'm just wondering what is it about? Is it about the consumer or what they're managing to do to sort of navigate some of the mitigate some of the challenges right now with, you know, higher input prices and, you know, getting people through the door? Yeah, well, you got to eat. And if you've ever been stuck in a, in an airport and had your flight delayed a few hours, chili sometimes is the only option in a lot of cases. But, you know, it's also a popular spot for those business lunches in sort of the metro areas around the country office parks. So you see them a lot there, and their price point is not at the $35 range per person. It's more closer to the $25 range. Just a step up from a Chipotle. If you're thinking about, you know, a sandwich or burger and a soda at lunch. So they it is not not reasonable for a lot of consumers, especially for business travelers as well. So they're resilient there as well. Good family restaurant. And the turnaround story is really what's brought the stock price back over the last couple of years. So this company Brinker is sort of taking control of it and taking more control of its locations. But also it's a real estate play as well. There's Chili's all over this country. Yeah. Understood. All right. So obviously getting in the right spots there and trying to capture some of that. Obviously consumer demand. I'm just wondering now that we've heard from a few names here, Caleb, what are the key metrics you're looking out for as fast as sort of as far as fast casual is concerned, you know, particularly given the current macro environment. Yeah. Restaurant margins, if you just look at each, you know, how much margin they're squeezing from each restaurant and then aggregate that for a company like a Brinker's that has a lot of locations, think about the fact that it's really hard to make any money in a restaurant, period. But these companies have found a way to do it at scale, and at scale is allowing them to open and acquire new restaurants. The more you open and the more margin you're able to squeeze out of them, the better it looks. But on both the top and the bottom line here. So they're able to squeeze out good margins, relatively stable margins, even though we've had higher oil prices, higher import prices, higher tariffs, they've been able to do it. And some of that is because they've been able to raise their prices just enough to where they're able to squeeze out that margin without sort of turning their customers away. So there is a breaking point in there somewhere. They say the cure for higher prices is higher prices. These companies have not seen it yet. We'll see how much longer they can hold in there and how long the consumer holds in. I want to watch these margins closely. They're hanging in there for now. As you say, Caleb, you've got to eat. Thanks so much for all of that. Really appreciate your breakdown. Caleb Silver, Editor in chief over at Investopedia. Let's trade Brinker International now with Tom white, host of Fast Market. Good morning Tom, having a great day. As I mentioned, having a great year and the last five years up quite considerably as well. Just walk us through an example trade here. Yeah. Over five years of gains as far as comparable sales for Chili's. They got over 1600 of those out there. So that's done really well. 5% growth against same store sales. So yeah everything seems to be going right. Then you look at that chart that we've got up there. It's parabolic to the upside up over 60% so far this year. On a technical basis. Overbought the RSI is above the 71 levels. Anything above 70 is considered overbought. But it's had a great run. So I looked at a strategy that takes advantage of maybe the move. It hit all time highs today where at least it consolidates, maybe goes a little bit lower, or you can be wrong in the stock can go higher and you could still be potentially profitable. This is out in the September monthly option series. So giving myself about 37 days to expiration. They don't have weekly options listed. But I'm going to sell it out of the money. Neutral to bearish call vertical sell the September 2nd 50 calls. And then against that buy the 260 strike calls. So a short $10 wide neutral to bearish call vertical. You're collecting roughly about a $3 credit. That's what you can make 300 bucks with about $700 in risk. But it takes your break even all the way up to $253 to the upside. That's nearly 9% above the current share price. So when I say you can be wrong on a trade like this and still be profitable, those probabilities come into play. There's a probability of over 70% that EAT will be below the 250 level, or the 253 level into expiration basically over the next five weeks. So if you look at the technicals on it, yeah earnings have been good. Margins have been decent. They raised expectations. But maybe this this stock is due for not maybe a correction but just some consolidation at these levels. This strategy takes advantage of where we sit in an overbought level on a technical basis also. So yeah using the neutral to bearish short call vertical if you think this stock is going to consolidate go lower or even go higher just remains below 253 over the next basically month. All right a good look at it for us this morning hitting an all ti