Back to top

Analyst Blog

Upscale casual dining restaurateur, The Cheesecake Factory Incorporated (CAKE - Analyst Report), is scheduled to report fourth-quarter fiscal 2013 results on Feb 12, 2014 after the market close.

Last quarter, Cheesecake Factory posted a 1.96% positive surprise. On an average, the company has posted a 1.67% positive surprise in the last four quarters. Let’s see how things are shaping up for the fourth quarter.

Factors to Consider this Quarter

Although Cheesecake Factory beat the Zacks Consensus Estimate for both earnings and revenues in the third quarter, its comps growth has slowed down mostly due to underperformance at the Grand Lux Café brand. Comp sales during the quarter declined 2.6% at Grand Lux Café. Going forward, we believe that the brand’s performance will continue to be under pressure.

For the fourth quarter of 2013, earnings per share are guided within the range of 57 cents – 60 cents. The Zacks Consensus Estimate for the fourth-quarter is 58 cents. Estimates for the fourth quarter have largely been revised downwards in the last 30 days.

Management expects 2013 earnings per share within the $2.10–$2.13 range. We would like to remind investors that at the third-quarter conference call, the company tightened its earnings per share guidance for 2013 anticipating lower external bakery sales. In addition, a higher food cost environment may hurt margin in the ensuing quarter.

Earnings Whispers?

However, our proven model does not conclusively show that Cheesecake Factory will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP:  The ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because both the estimates currently stand at 58 cents.

Zacks Rank: Cheesecake Factory carries a Zacks Rank #3 (Hold), which when combined with a 0.00% ESP, makes surprise prediction difficult.

We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions. 

Other Stocks to Consider

Other stocks in the services sector that have both a positive earnings ESP and a favorable Zacks Rank are:

Jack in the Box Inc. (JACK - Snapshot Report), with Earnings ESP of + 1.54% and a Zacks Rank #2 (Buy).

Texas Roadhouse, Inc. (TXRH - Snapshot Report), with Earnings ESP of + 4.35% and a Zacks Rank #2 (Buy).

Melco Crown Entertainment Limited (MPEL - Snapshot Report), with Earnings ESP of + 7.50% and a Zacks Rank #1 (Strong Buy).

Please login to Zacks.com or register to post a comment.