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Cheesecake Factory (CAKE) Beats on Q2 Earnings, Stock Up
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The Cheesecake Factory Inc. (CAKE - Free Report) posted mixed second-quarter 2016 results wherein earnings beat the Zacks Consensus Estimate while revenues missed the same.
Notably, the company’s shares rallied nearly 1.5% in afterhours trading on Jul 27, after the company raised its earnings guidance for full-year 2016 and also increased its dividend by 20%.
Earnings and Revenue Discussion
The company's adjusted earnings of 78 cents per share beat the Zacks Consensus Estimate of 70 cents by 11.4% and increased 13% year over year on the back of higher top-line and lower share count.
Sales of $558.9 million, on the other hand, missed the Zacks Consensus Estimate of $562.0 million by 0.6% but was up 5.7% on a year-over-year basis.
Inside the Headlines
Comps at Cheesecake Factory restaurants increased 0.3%, lower than the 1.7% growth registered last quarter and 2.8% posted in the year-ago quarter. Comps were hurt by a 2.7% decline in traffic, partly offset by menu price increase of 2.9% and positive mix of 0.2%.
Cost of sales ratio decreased 120 basis points (bps) year over year to 22.7%. This was primarily attributable to lower seafood, groceries and poultry costs plus higher mix of restaurant sales as compared to bakery sales. Labor expense ratio was 33.2%, up 140 bps year over year due to high hourly wages.
General and administrative expenses accounted for 6.4% of revenues in the second quarter as compared to the prior-year quarter level of 6.7%. Pre-opening expenses were $2.3 million, down 43.3% year over year.
Dividend Hike
The board of directors announced a 20% increase in the quarterly dividend from 20 cents to 24 cents per share, payable on Aug 23, 2016, to shareholders of record as of Aug 10, 2016. This adds up to an annual dividend of 96 cents, representing a dividend yield of nearly 2%.
For the third quarter, Cheesecake Factory expects earnings per share in the range of 59 cents to 62 cents, on the back of expected comps growth of between 0.5% and 1.5% at Cheesecake Factory restaurants.
Guidance for 2016
Cheesecake Factory raised the earnings guidance for 2016.
The company expects earnings per share in the range of $2.70 to $2.76, up from the prior guidance of 2.61 to $2.70, on the back of solid bottom-line performance in the second quarter.
Comps are however projected to be roughly 1%, lower from the earlier guidance of 1%--2%.
Nonetheless, the company expects an increase in operating margins. Meanwhile, the company reiterated its capital expenditure expectations at the range of $100 million to $110.0 million for 2016 owing to eight planned openings this year and a few scheduled for early 2017.
Zacks Rank & Stocks to Consider
Cheesecake Factory has a Zacks Rank #3 (Hold). Better-ranked restaurant stocks are Jack in the Box Inc. (JACK - Free Report) ), Famous Dave's of America Inc. (DAVE - Free Report) and Papa John's International Inc. (PZZA - Free Report) . All the three stocks carry a Zacks Rank #2 (Buy).
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Cheesecake Factory (CAKE) Beats on Q2 Earnings, Stock Up
The Cheesecake Factory Inc. (CAKE - Free Report) posted mixed second-quarter 2016 results wherein earnings beat the Zacks Consensus Estimate while revenues missed the same.
Notably, the company’s shares rallied nearly 1.5% in afterhours trading on Jul 27, after the company raised its earnings guidance for full-year 2016 and also increased its dividend by 20%.
Earnings and Revenue Discussion
The company's adjusted earnings of 78 cents per share beat the Zacks Consensus Estimate of 70 cents by 11.4% and increased 13% year over year on the back of higher top-line and lower share count.
Sales of $558.9 million, on the other hand, missed the Zacks Consensus Estimate of $562.0 million by 0.6% but was up 5.7% on a year-over-year basis.
Inside the Headlines
Comps at Cheesecake Factory restaurants increased 0.3%, lower than the 1.7% growth registered last quarter and 2.8% posted in the year-ago quarter. Comps were hurt by a 2.7% decline in traffic, partly offset by menu price increase of 2.9% and positive mix of 0.2%.
Cost of sales ratio decreased 120 basis points (bps) year over year to 22.7%. This was primarily attributable to lower seafood, groceries and poultry costs plus higher mix of restaurant sales as compared to bakery sales. Labor expense ratio was 33.2%, up 140 bps year over year due to high hourly wages.
General and administrative expenses accounted for 6.4% of revenues in the second quarter as compared to the prior-year quarter level of 6.7%. Pre-opening expenses were $2.3 million, down 43.3% year over year.
Dividend Hike
The board of directors announced a 20% increase in the quarterly dividend from 20 cents to 24 cents per share, payable on Aug 23, 2016, to shareholders of record as of Aug 10, 2016. This adds up to an annual dividend of 96 cents, representing a dividend yield of nearly 2%.
CHEESECAKE FACT Price, Consensus and EPS Surprise
CHEESECAKE FACT Price, Consensus and EPS Surprise | CHEESECAKE FACT Quote
Third-Quarter Outlook
For the third quarter, Cheesecake Factory expects earnings per share in the range of 59 cents to 62 cents, on the back of expected comps growth of between 0.5% and 1.5% at Cheesecake Factory restaurants.
Guidance for 2016
Cheesecake Factory raised the earnings guidance for 2016.
The company expects earnings per share in the range of $2.70 to $2.76, up from the prior guidance of 2.61 to $2.70, on the back of solid bottom-line performance in the second quarter.
Comps are however projected to be roughly 1%, lower from the earlier guidance of 1%--2%.
Nonetheless, the company expects an increase in operating margins. Meanwhile, the company reiterated its capital expenditure expectations at the range of $100 million to $110.0 million for 2016 owing to eight planned openings this year and a few scheduled for early 2017.
Zacks Rank & Stocks to Consider
Cheesecake Factory has a Zacks Rank #3 (Hold). Better-ranked restaurant stocks are Jack in the Box Inc. (JACK - Free Report) ), Famous Dave's of America Inc. (DAVE - Free Report) and Papa John's International Inc. (PZZA - Free Report) . All the three stocks carry a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>