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Will Cheesecake Factory (CAKE) Q4 Earnings Disappoint?

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The Cheesecake Factory Inc. (CAKE - Free Report) is scheduled to report fourth-quarter and full-year 2016 numbers on Feb 22, after market close.

Last quarter, Cheesecake Factory posted a 14.75% positive earnings surprise. Moreover, the company’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 10.84%.

Let’s see how things are shaping up for this announcement.

Factors Likely to Influence Q4 Results

For the fourth quarter, Cheesecake Factory expects earnings per share in the range of 65 cents to 68 cents, on the back of expected comps growth between 1% and 2% at Cheesecake Factory restaurants.

Notably, the company has posted positive comps for 27 consecutive quarters on the back of various sales and digital initiatives. Menu innovation, increased focus on home and office delivery, the rollout of an improved server training program and the launch of a mobile payment app should thus help in keeping up the trend of positive comps.

However, a soft consumer spending environment in the U.S. restaurant space is likely to hurt traffic and thereby comps in the to-be-reported quarter.

Moreover, Cheesecake Factory’s profits might continue to remain under stress owing to a rising wage rates scenario. Additionally, pre-opening costs of outlets and expenses related to sales initiatives might dent the quarter’s profits.

Earnings Whispers

Our proven model does not conclusively show that Cheesecake Factory is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.

Zacks ESP: Cheesecake Factory has an Earnings ESP of -2.99%. This is because the Most Accurate estimate stands at 65 cents, while the Zacks Consensus Estimate is pegged higher at 67 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Cheesecake Factory has a Zacks Rank #4 (Sell).

Please note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Papa John’s International, Inc. (PZZA - Free Report) has an Earnings ESP of +4.55% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Jack in the Box Inc. (JACK - Free Report) has an Earnings ESP of +2.42% and a Zacks Rank #3.

SpartanNash Company (SPTN - Free Report) has an Earnings ESP of +2.04% and a Zacks Rank #2.

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