Back to top

Image: Shutterstock

What's in Store for Cheesecake Factory (CAKE) Q2 Earnings?

Read MoreHide Full Article

The Cheesecake Factory Incorporated (CAKE - Free Report) is scheduled to report second-quarter fiscal 2021 results on Jul 27, after market close.

In the last reported quarter, the company’s sales and earnings beat the Zacks Consensus Estimate by 233.3% and 5%, and increased 53.8% and 2% on a year-over-year basis, respectively. The upside can be primarily attributed to easing COVID-19 restrictions, solid off-premise sales and pent-up dining demand. The company also witnessed improvement in labor and other operating expenses.

Trend in Estimate Revision

For the quarter to be reported, the Zacks Consensus Estimate for earnings per share has moved 188.5% up to 75 cents over the past 90 days. The estimated figure indicates a significant improvement from the loss of 87 cents per share in the year-ago quarter. The consensus mark for revenues is pegged at $747.6 million, suggesting 152.7% growth from the year-ago reported figure of $295.9 million.

Factors to Consider

The company’s second-quarter fiscal 2021 performance is expected to have been driven by the solid off-premise business model. Also, the company’s revenues are expected to be solid in the delivery channel. Also, its focus on initiatives like contactless menu, operational changes and other technologies is likely to have boosted revenues substantially in the quarter. The Zacks Consensus Estimate for restaurant revenues is pegged at $600 million, indicating robust growth of 102.7% from the year-earlier reported figure.

Moreover, the company’s quarterly performance has likely benefited from strong digitalization efforts. The company is expected to have witnessed incremental sales from its delivery service, which continues to be rolled out nationwide. The company also continues to improve its to-go business, including online ordering capability. This may have been largely contributing to its strong off-premise sales channels. During the first quarter of fiscal 2021, off-premise represented approximately 43% of Cheesecake Factory’s restaurant sales. The solid momentum is likely to have been maintained in the quarter to be reported.

However, expenses related to sales initiatives, higher labor charges and additional cleaning costs are likely to have hurt profits in the quarter to be reported. The restaurant industry has been facing declining traffic for quite some time now.

What Our Model Indicates

Our proven model predicts an earnings beat for Cheesecake Factory this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.

Earnings ESP: Earnings ESP for Cheesecake Factory is +8.18%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently has a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks With Favorable Combination

Here are a few other companies in the Zacks Retail – Restaurants sector which also have the right combination of elements to post an earnings beat in their respective quarters to be reported.

BJ's Restaurants, Inc. (BJRI - Free Report) has an Earnings ESP of +16.33% and a Zacks Rank #2.

Papa John's International, Inc. (PZZA - Free Report) has an Earnings ESP of +6.56% and a Zacks Rank #2.

Restaurant Brands International Inc. (QSR - Free Report) has an Earnings ESP of +0.37% and a Zacks Rank #2.