The S&P 500 was dropping on Thursday morning but shareholders of restaurant chain Shake Shack (SHAK +1.80%) might not have noticed. The company reported financial results for the second quarter of 2024 this morning before the stock market opened. And as of 11:30 a.m. ET, Shake Shack stock was up nearly 18%.
Growth and profits for the burger chain
In Q2, Shake Shack opened 12 new restaurants that are owned by the company and 11 licensed locations. Between these new locations and same-store-sales growth of 4%, the company's Q2 revenue was up 16% year over year to $316 million. That was higher than management's guidance and higher than expectations from analysts.
NYSE: SHAK
Key Data Points
Shake Shack's profit metrics are also improving lately. In Q2, the company had operating income of nearly $11 million, which was a big jump from operating income of less than $5 million in the same quarter of last year.
Moreover, Shake Shack's management says it's on track this year to have positive free cash flow for the first time since 2017, which is another reason investors are celebrating.
What to do now
Shake Shack modestly raised parts of its full-year guidance. Management expects to generate about $1.24 billion in full-year revenue this year, which represents a good growth rate of at least 14%. And as mentioned, it does expect to generate positive full-year free cash flow.
Things are looking good for Shake Shack right now but one thing to think about is profitability. The company only had a thin Q2 operating margin of 3% even though things are as good as ever. It wouldn't take much of a headwind for the business to slip back to breakeven.
Considering the stock is up almost 40% this year, I don't see a compelling reason to rush out to buy Shake Shack stock today. It's better to watch this one from the sidelines for now, in my opinion.
