Yahoo Finance The Cheesecake Factory (CAKE) Down 0.3% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Cheesecake Factory (CAKE). Shares have lost about 0.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is The Cheesecake Factory due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Cheesecake Factory Q4 Earnings Beat Estimates, Rise Y/Y
Cheesecake Factory reported mixed fourth-quarter fiscal 2023 results, with earnings beating the Zacks Consensus Estimate and revenues missing the same. The top line fell year over year, while the bottom line increased from the prior-year quarter’s figure.
Earnings & Revenue Discussion
In the quarter under review, the company reported adjusted earnings per share (EPS) of 80 cents, beating the Zacks Consensus Estimate of 74 cents by 8.1%. In the year-ago period, the company reported adjusted EPS of 56 cents.
Quarterly revenues missed the consensus estimate of $877 million by 0.03%. The top line dropped 1.8% on a year-over-year basis.
Solid Comps Growth Drives Q4 Results
In the reported quarter, comps at Cheesecake Factory restaurants rose 2.5% year over year (lower than our expectation of 4% growth) compared with 4% in the prior-year quarter. Comps rose 14% from 2019 levels. The upside was driven by improved traffic and a favorable menu mix.
For the 52-week ended Jan 2, 2024, comps at Cheesecake Factory restaurants increased 3% year over year compared with 7% growth reported a year ago.
North Italia comps rose 7% year over year compared with 9% in the year-ago quarter. The metric increased 34% compared with 2019 levels. Our model suggested the metric to rise 8.3% year over year.
Costs in Detail
The cost of food and beverage, as a percentage of revenues, declined 170 basis points (bps) year over year to 23% in the fiscal fourth quarter.
Labor expenses, as a percentage of total revenues, amounted to 35.2%, down 50 bps from the year-ago quarter’s levels. We expected the metric to be 35.7% of revenues in the quarter.
Other operating costs, as a percentage of total revenues, were 26.8%, up 20 bps from the prior-year quarter’s level. In the quarter, we anticipated the metric to be 26.4% of revenues.
General and administrative expenses accounted for 6.2% of revenues, down 10 bps year over year. Our model predicted the metric to be 6.1% of revenues in the fiscal fourth quarter.
In the fiscal fourth quarter, pre-opening expenses accounted for 1.1% of revenues, up 30 bps year over year.
Balance Sheet
As of Jan 2, 2024, Cheesecake Factory’s cash and cash equivalents totaled $56.3 million compared with $114.8 million at the end of the fiscal 2022. Long-term debt (net of issuance costs) was $470 million compared with $468 million as of fiscal 2022-end. As of Jan 2, the company had a total available liquidity of $292.8 million.
Management declared a quarterly cash dividend of 27 cents per share. The dividend will be payable on Mar 19 to shareholders of record as of Mar 6, 2024. In the fiscal fourth quarter, CAKE repurchased 318,400 shares for $9.8 million.
Store Developments
In the quarter under review, Cheesecake Factory opened nine new restaurants and registered solid demand. The openings included three Cheesecake Factory restaurants, three North Italia restaurants and three FRC restaurants. Internationally, the company opened two Cheesecake Factory restaurants under licensing agreements in China and Thailand. Subsequent to quarter-end, the company opened one North Italia restaurant, one Flower Child, one Culinary Dropout and one Cheesecake Factory restaurant (internationally under a licensing agreement in Mexico).
In fiscal 2024, the management expects to open 22 new restaurants. This includes three to four Cheesecake factories, six to seven North Italia's, six to seven Flower Child and six FRC restaurants.
Fiscal 2023 Highlights
Total revenues in fiscal 2023 amounted to $3.4 billion compared with $3.3 billion reported in fiscal 2022.
Adjusted net income in fiscal 2023 came in at $131.8 million compared with $76.2 million in fiscal 2022.
In fiscal 2023, adjusted EPS came in at $2.69 per share compared with $1.51 reported in the previous year.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -10.55% due to these changes.
VGM Scores
Currently, The Cheesecake Factory has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile 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, The 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
The Cheesecake Factory is part of the Zacks Retail - Restaurants industry. Over the past month, BJ's Restaurants (BJRI), a stock from the same industry, has gained 5.4%. The company reported its results for the quarter ended December 2023 more than a month ago.
BJ's Restaurants reported revenues of $323.64 million in the last reported quarter, representing a year-over-year change of -6%. EPS of $0.34 for the same period compares with $0.17 a year ago.
For the current quarter, BJ's Restaurants is expected to post earnings of $0.14 per share, indicating a change of -6.7% from the year-ago quarter. The Zacks Consensus Estimate has changed -8.3% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for BJ's Restaurants. Also, the stock has a VGM Score of B.
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
The Cheesecake Factory Incorporated (CAKE) : Free Stock Analysis Report
BJ's Restaurants, Inc. (BJRI) : Free Stock Analysis Report
