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Cheesecake Factory's (CAKE) Shares Gain on Q3 Earnings Beat
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The Cheesecake Factory Incorporated (CAKE - Free Report) reported mixed third-quarter 2018 results, with earnings surpassing the Zacks Consensus Estimate after a miss in the last two quarters. However, revenues missed the mark.
Adjusted earnings of 62 cents per share beat the Zacks Consensus Estimate of 58 cents by 6.9%. The bottom line improved 10.7% from the prior-year quarter. Particularly, reduced tax rate, stabilized medical insurance costs along with lower wage inflation drove earnings in the quarter. Also, higher comps at the Cheesecake Factory restaurants aided overall profitability.
Owing to earnings beat, shares of the company gained 1.9% in after-hour trading on Oct 30.
Let’s take a closer look at the numbers.
Detailed Revenue Discussion
Total revenues came in at $580.9 million, which missed the consensus estimate of $585 million by 0.7%. However, the top line improved 4.6% year over year on the back of increased comparable sales.
Comps at Cheesecake Factory restaurants increased 1.5%, while the same had declined 2.3% in the year-ago quarter.
Cost Details
Cost of sales ratio increased 10 basis points (bps) year over year to 23%. Meanwhile, labor expense ratio was 35.2%, up 30 bps from the year-ago quarter but down 60 bps from the second quarter of 2018.
Other operating costs were 24.8% of revenues, down 10 bps from the year-ago quarter. General and administrative (G&A) expenses accounted for 6.5% of revenues in third-quarter 2018, up 10 bps from the prior-year quarter. Notably, pre-opening expenses remained flat at 0.6% of total revenues compared with the year-ago quarter.
The Cheesecake Factory Incorporated Price, Consensus and EPS Surprise
As of Oct 2, 2018, cash and cash equivalents totaled $12.6 million compared with $6 million as of Jan 2, 2018.
In the third quarter of 2018, Cheesecake Factory repurchased approximately 370,000 shares of its common stock at a cost of $18.9 million. Year to date, the company has bought back approximately 1.2 million shares of its common stock at a cost of $60.9 million.
Outlook
For the fourth quarter, adjusted earnings per share are estimated in the range of 60-64 cents based on anticipated comps of 0.5-1.5% at Cheesecake Factory restaurants.
2018 Guidance
Cheesecake Factory expects earnings per share in the $2.42-$2.46 band (as compared with the previous projection of $2.40-$2.48). The Zacks Consensus Estimate for 2018 earnings is pegged at $2.43.
Meanwhile, the company expects comps to grow 1.5% compared with the previously estimation of 1.5-2%.
For 2018, Cheesecake Factory continues to expect capital expenditures between $80 million and $85 million.
Additionally, the company plans on opening five restaurants in 2018.
Zacks Rank & Key Picks
Cheesecake Factory carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the same space include Good Times Restaurants Inc. (GTIM - Free Report) , with a Zacks Rank #1 (Strong Buy), as well as Darden Restaurants, Inc. (DRI - Free Report) and Dunkin' Brands Group, Inc. with a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Good Times Restaurants has an expected earnings growth rate of 38.9% for the current year.
Darden Restaurants reported better-than-expected earnings in the trailing four quarters, the average beat being 5.1%.
Dunkin' Brands Group has a long-term earnings growth rate of 54.82%.
3 Medical Stocks to Buy Now
The greatest discovery in this century of biology is now at the flashpoint between theory and realization. Billions of dollars in research have poured into it. Companies are already generating revenue, and cures for a variety of deadly diseases are in the pipeline.
So are big potential profits for early investors. Zacks has released an updated Special Report that explains this breakthrough and names the best 3 stocks to ride it.
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Cheesecake Factory's (CAKE) Shares Gain on Q3 Earnings Beat
The Cheesecake Factory Incorporated (CAKE - Free Report) reported mixed third-quarter 2018 results, with earnings surpassing the Zacks Consensus Estimate after a miss in the last two quarters. However, revenues missed the mark.
Adjusted earnings of 62 cents per share beat the Zacks Consensus Estimate of 58 cents by 6.9%. The bottom line improved 10.7% from the prior-year quarter. Particularly, reduced tax rate, stabilized medical insurance costs along with lower wage inflation drove earnings in the quarter. Also, higher comps at the Cheesecake Factory restaurants aided overall profitability.
Owing to earnings beat, shares of the company gained 1.9% in after-hour trading on Oct 30.
Let’s take a closer look at the numbers.
Detailed Revenue Discussion
Total revenues came in at $580.9 million, which missed the consensus estimate of $585 million by 0.7%. However, the top line improved 4.6% year over year on the back of increased comparable sales.
Comps at Cheesecake Factory restaurants increased 1.5%, while the same had declined 2.3% in the year-ago quarter.
Cost Details
Cost of sales ratio increased 10 basis points (bps) year over year to 23%. Meanwhile, labor expense ratio was 35.2%, up 30 bps from the year-ago quarter but down 60 bps from the second quarter of 2018.
Other operating costs were 24.8% of revenues, down 10 bps from the year-ago quarter. General and administrative (G&A) expenses accounted for 6.5% of revenues in third-quarter 2018, up 10 bps from the prior-year quarter. Notably, pre-opening expenses remained flat at 0.6% of total revenues compared with the year-ago quarter.
The Cheesecake Factory Incorporated Price, Consensus and EPS Surprise
The Cheesecake Factory Incorporated Price, Consensus and EPS Surprise | The Cheesecake Factory Incorporated Quote
Balance Sheet
As of Oct 2, 2018, cash and cash equivalents totaled $12.6 million compared with $6 million as of Jan 2, 2018.
In the third quarter of 2018, Cheesecake Factory repurchased approximately 370,000 shares of its common stock at a cost of $18.9 million. Year to date, the company has bought back approximately 1.2 million shares of its common stock at a cost of $60.9 million.
Outlook
For the fourth quarter, adjusted earnings per share are estimated in the range of 60-64 cents based on anticipated comps of 0.5-1.5% at Cheesecake Factory restaurants.
2018 Guidance
Cheesecake Factory expects earnings per share in the $2.42-$2.46 band (as compared with the previous projection of $2.40-$2.48). The Zacks Consensus Estimate for 2018 earnings is pegged at $2.43.
Meanwhile, the company expects comps to grow 1.5% compared with the previously estimation of 1.5-2%.
For 2018, Cheesecake Factory continues to expect capital expenditures between $80 million and $85 million.
Additionally, the company plans on opening five restaurants in 2018.
Zacks Rank & Key Picks
Cheesecake Factory carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the same space include Good Times Restaurants Inc. (GTIM - Free Report) , with a Zacks Rank #1 (Strong Buy), as well as Darden Restaurants, Inc. (DRI - Free Report) and Dunkin' Brands Group, Inc. with a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Good Times Restaurants has an expected earnings growth rate of 38.9% for the current year.
Darden Restaurants reported better-than-expected earnings in the trailing four quarters, the average beat being 5.1%.
Dunkin' Brands Group has a long-term earnings growth rate of 54.82%.
3 Medical Stocks to Buy Now
The greatest discovery in this century of biology is now at the flashpoint between theory and realization. Billions of dollars in research have poured into it. Companies are already generating revenue, and cures for a variety of deadly diseases are in the pipeline.
So are big potential profits for early investors. Zacks has released an updated Special Report that explains this breakthrough and names the best 3 stocks to ride it.
See them today for free >>