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Why Is Cheesecake Factory (CAKE) Up 3.7% Since Last Earnings Report?
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It has been about a month since the last earnings report for Cheesecake Factory (CAKE - Free Report) . Shares have added about 3.7% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Cheesecake Factory due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Cheesecake Factory Q3 Earnings & Revenue Miss Estimates
Cheesecake Factory reported lower-than-expected third-quarter fiscal 2023 results with earnings and revenues missing the Zacks Consensus Estimate. Nonetheless, the company’s top and bottom lines improved on a year-over-year basis courtesy of higher consumer demand, new restaurant openings and operational efficiency.
Earnings & Revenue Discussion
In the quarter under review, the company reported adjusted earnings per share (EPS) of 39 cents, missing the Zacks Consensus Estimate of 42 cents by 7.1%. In the year-ago period, the company reported a loss of 3 cents per share.
Total revenues of $830.2 million missed the consensus estimate of $842 million by 1.4%. However, the top line increased 5.9% on a year-over-year basis.
Solid Comps Growth
In the reported quarter, comps at Cheesecake Factory restaurants rose 2.4% year over year (lower than our expectation of 3.4% growth) compared with 1.1% in the prior-year quarter. Comps grew 12.6% from 2019 levels. Notably, the quarterly comps exceeded the Knapp-Track and Black Box casual dining indices for both periods.
For the 39-week ended Oct 3, 2023, comps at Cheesecake Factory restaurants increased 3.2% year over year compared with 8.2% a year ago.
In the fiscal third quarter, The Cheesecake Factory's off-premise sales accounted for 21% of their total sales, slightly below the levels observed in the second quarter. This aligns with historical trends, where the summer months tend to exhibit a lower proportion of off-premise sales, suggesting the possibility of a return to typical seasonal patterns.
North Italia comps gained 8% year over year compared with 10% in the year-ago quarter. The metric increased 28% compared with 2019 levels. Our model suggested the metric to rise 6.9% year over year.
Costs in Detail
The cost of food and beverage, as a percentage of revenues, increased 30 basis points (bps) year over year to 23.5% in the fiscal third quarter. Our model predicted the metric to be 24.2% of revenues in the quarter.
Labor expenses, as a percentage of total revenues, amounted to 36.3%, down 110 bps from the year-ago quarter’s levels. We expected the metric to be 36.1% of revenues in the quarter.
Other operating costs, as a percentage of total revenues, were 27.6%, down 10 bps from the prior-year quarter’s level. In the quarter, we anticipated the metric to be 26.3% of revenues.
General and administrative expenses accounted for 6.5% of revenues, up 10 bps year over year. Our model predicted the metric to be 6.7% of revenues in the fiscal third quarter.
In the fiscal third quarter, pre-opening expenses accounted for 0.8% of revenues, up 20 bps year over year.
Balance Sheet
As of Oct 3, Cheesecake Factory’s cash and cash equivalents totaled $64 million compared with $114.8 million at the fiscal 2022-end. Long-term debt (net of issuance costs) was $469.5 million compared with the fiscal 2022-end value of $468 million. As of Oct 3, the company had a total available liquidity of $300 million.
Management declared a quarterly cash dividend of 27 cents per share. The dividend will be payable on Nov 28, to shareholders of record as of Nov 15. In the fiscal third quarter, CAKE also repurchased 453,400 shares for $14.6 million.
Store Developments
In the quarter under review, Cheesecake Factory opened two new restaurants. Management now expects to open 16 restaurants in fiscal 2023, along with two new international restaurants under licensing agreements.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
VGM Scores
At this time, Cheesecake Factory has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Cheesecake Factory has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Cheesecake Factory is part of the Zacks Retail - Restaurants industry. Over the past month, BJ's Restaurants (BJRI - Free Report) , a stock from the same industry, has gained 10.7%. The company reported its results for the quarter ended September 2023 more than a month ago.
BJ's Restaurants reported revenues of $318.64 million in the last reported quarter, representing a year-over-year change of +2.3%. EPS of -$0.16 for the same period compares with -$0.25 a year ago.
BJ's Restaurants is expected to post earnings of $0.28 per share for the current quarter, representing a year-over-year change of +64.7%. Over the last 30 days, the Zacks Consensus Estimate has changed +2.1%.
BJ's Restaurants has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.
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Why Is Cheesecake Factory (CAKE) Up 3.7% Since Last Earnings Report?
It has been about a month since the last earnings report for Cheesecake Factory (CAKE - Free Report) . Shares have added about 3.7% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Cheesecake Factory due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Cheesecake Factory Q3 Earnings & Revenue Miss Estimates
Cheesecake Factory reported lower-than-expected third-quarter fiscal 2023 results with earnings and revenues missing the Zacks Consensus Estimate. Nonetheless, the company’s top and bottom lines improved on a year-over-year basis courtesy of higher consumer demand, new restaurant openings and operational efficiency.
Earnings & Revenue Discussion
In the quarter under review, the company reported adjusted earnings per share (EPS) of 39 cents, missing the Zacks Consensus Estimate of 42 cents by 7.1%. In the year-ago period, the company reported a loss of 3 cents per share.
Total revenues of $830.2 million missed the consensus estimate of $842 million by 1.4%. However, the top line increased 5.9% on a year-over-year basis.
Solid Comps Growth
In the reported quarter, comps at Cheesecake Factory restaurants rose 2.4% year over year (lower than our expectation of 3.4% growth) compared with 1.1% in the prior-year quarter. Comps grew 12.6% from 2019 levels. Notably, the quarterly comps exceeded the Knapp-Track and Black Box casual dining indices for both periods.
For the 39-week ended Oct 3, 2023, comps at Cheesecake Factory restaurants increased 3.2% year over year compared with 8.2% a year ago.
In the fiscal third quarter, The Cheesecake Factory's off-premise sales accounted for 21% of their total sales, slightly below the levels observed in the second quarter. This aligns with historical trends, where the summer months tend to exhibit a lower proportion of off-premise sales, suggesting the possibility of a return to typical seasonal patterns.
North Italia comps gained 8% year over year compared with 10% in the year-ago quarter. The metric increased 28% compared with 2019 levels. Our model suggested the metric to rise 6.9% year over year.
Costs in Detail
The cost of food and beverage, as a percentage of revenues, increased 30 basis points (bps) year over year to 23.5% in the fiscal third quarter. Our model predicted the metric to be 24.2% of revenues in the quarter.
Labor expenses, as a percentage of total revenues, amounted to 36.3%, down 110 bps from the year-ago quarter’s levels. We expected the metric to be 36.1% of revenues in the quarter.
Other operating costs, as a percentage of total revenues, were 27.6%, down 10 bps from the prior-year quarter’s level. In the quarter, we anticipated the metric to be 26.3% of revenues.
General and administrative expenses accounted for 6.5% of revenues, up 10 bps year over year. Our model predicted the metric to be 6.7% of revenues in the fiscal third quarter.
In the fiscal third quarter, pre-opening expenses accounted for 0.8% of revenues, up 20 bps year over year.
Balance Sheet
As of Oct 3, Cheesecake Factory’s cash and cash equivalents totaled $64 million compared with $114.8 million at the fiscal 2022-end. Long-term debt (net of issuance costs) was $469.5 million compared with the fiscal 2022-end value of $468 million. As of Oct 3, the company had a total available liquidity of $300 million.
Management declared a quarterly cash dividend of 27 cents per share. The dividend will be payable on Nov 28, to shareholders of record as of Nov 15. In the fiscal third quarter, CAKE also repurchased 453,400 shares for $14.6 million.
Store Developments
In the quarter under review, Cheesecake Factory opened two new restaurants. Management now expects to open 16 restaurants in fiscal 2023, along with two new international restaurants under licensing agreements.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
VGM Scores
At this time, Cheesecake Factory has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Cheesecake Factory has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Cheesecake Factory is part of the Zacks Retail - Restaurants industry. Over the past month, BJ's Restaurants (BJRI - Free Report) , a stock from the same industry, has gained 10.7%. The company reported its results for the quarter ended September 2023 more than a month ago.
BJ's Restaurants reported revenues of $318.64 million in the last reported quarter, representing a year-over-year change of +2.3%. EPS of -$0.16 for the same period compares with -$0.25 a year ago.
BJ's Restaurants is expected to post earnings of $0.28 per share for the current quarter, representing a year-over-year change of +64.7%. Over the last 30 days, the Zacks Consensus Estimate has changed +2.1%.
BJ's Restaurants has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.