It has been about a month since the last earnings report for Cheesecake Factory (CAKE). Shares have added about 6.7% in that time frame, outperforming 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 Beat Estimates, Revenues Lag
Cheesecake Factory reported third-quarter fiscal 2024 results, with earnings beating the Zacks Consensus Estimate and revenues missing the same. The top and the bottom lines increased from the prior-year quarter’s figures.
During the quarter, it stated benefits from strong demand and sales performance of new restaurant openings. The brand’s comparable sales and traffic surged past industry averages, outperforming the Black Box casual dining index by 310 and 380 basis points, respectively. Record-high guest satisfaction scores across both dine-in and to-go services further boosted sales and traffic. Operational gains - including better-than-expected flow through, increased labor productivity, effective overtime and wage management and reduced food waste - contributed to healthier restaurant-level margins.
Earnings & Revenue Discussion
In the quarter under review, the company reported adjusted earnings per share (EPS) of 58 cents, beating the Zacks Consensus Estimate of 47 cents by 23.4%. In the year-ago period, the company reported adjusted EPS of 39 cents.
Quarterly revenues of $865.5 million missed the consensus estimate by 0.06%. The top line increased by 4.2% on a year-over-year basis.
Q3 Comps
In the reported quarter, comps at Cheesecake Factory restaurants inched up by 1.6% year over year compared with a 2.4% rise reported in the prior-year quarter.
North Italia comps rose 2% year over year compared with 8% growth reported in the year-ago quarter.
Costs in Detail
The cost of food and beverage, as a percentage of revenues, contracted 90 basis points (bps) year over year to 22.6% in the fiscal third quarter.
Labor expenses, as a percentage of total revenues, amounted to 35.9%, down 40 bps year over year.
Other operating costs, as a percentage of total revenues, were 27.7%, up 10 bps from the prior-year quarter’s level.
General and administrative expenses accounted for 6.5% of revenues, flat year over year.
In the fiscal third quarter, pre-opening expenses accounted for 0.8% of revenues, flat year over year.
Balance Sheet
As of Oct. 1, 2024, Cheesecake Factory’s cash and cash equivalents totaled $52.2 million compared with $56.3 million as of Jan. 2, 2024. Long-term debt (net of issuance costs) was $471.6 million compared with $470 million as of Jan. 2, 2024. As of Oct.1, the company had a total available liquidity of $288.7 million compared with $277.2 million reported in the previous quarter.
Management declared a quarterly cash dividend of 27 cents per share. The dividend will be payable on Nov. 26 to shareholders of record as of Nov. 13, 2024. In the fiscal third quarter, it repurchased approximately 29,450 shares for $1.1 million.
Store Developments
In the quarter under review, the company opened four new restaurants. The openings included three Fox Restaurant Concepts restaurants and one Flower Child location. Following the quarter's end, additional openings included three North Italia locations, a Blanco in Phoenix and the debut of the first Flower Child in Salt Lake City.
With 17 new restaurants opened so far, the company remains on track to achieve its 2024 target of up to 22 new locations. In 2025, the company anticipates accelerating its growth by adding up to 24 new restaurants across its portfolio.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
VGM Scores
Currently, Cheesecake Factory has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% 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 upward for the stock, and the magnitude of these revisions looks promising. Notably, Cheesecake Factory has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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