U.S. Markets closed

Cheesecake Factory (CAKE) Earnings Miss, Sales Beat in Q1

Zacks Equity Research
1 / 3

Earnings Estimates Moving Higher for Vanda (VNDA): Time to Buy?

Vanda (VNDA) shares have started gaining and might continue moving higher in the near term, as indicated by solid earnings estimate revisions.

The Cheesecake Factory Inc.’s CAKE first-quarter 2018 earnings fell short of analysts’ expectation while revenues surpassed the same.

Adjusted earnings of 56 cents per share missed the Zacks Consensus Estimate of 68 cents by 17.6%. Earnings also declined 22.2% year over year. Higher-than-expected insurance cost along with some legal settlement expenses particularly dented the company’s earnings in the quarter.

The Cheesecake Factory Incorporated Price, Consensus and EPS Surprise

The Cheesecake Factory Incorporated Price, Consensus and EPS Surprise | The Cheesecake Factory Incorporated Quote

Despite earnings miss, the company’s strong sales-building initiatives contributed to the top line. The company extensively employed digital and social media campaigns to showcase its high-quality ingredients and preparation techniques, as well as focused on menu innovation. Shares therefore rose a meager 0.8% in after-hours trading. Cheesecake factory’s shares have also rallied 15.1% in the last six months, outperforming the industry’s gain of 1.5%.

Let’s delve deeper into the numbers.

Detailed Revenue Discussion

Total revenues of $590.7 million surpassed the consensus estimate of $581.5 million by 1.6% and grew 4.8% year over year on the back of increased comparable sales.

Comps at Cheesecake Factory restaurants increased 2.1%, whereas the year-ago quarter marked 0.3% growth in comps and the preceding quarter recorded a 0.9% decline.

Cost Details

Cost of sales ratio increased 10 basis points (bps) year over year to 23%. Meanwhile, labor expense ratio was 35.7%, up 130 bps from the year-ago quarter. This was primarily driven by higher hourly labor, including more wages, overtime and training costs.

General and administrative expenses accounted for 6.6% of revenues in first-quarter 2018, up 20 bps from the prior-year quarter, due to higher marketing costs, repairs and maintenance, and additional workers' comp insurance costs. Notably, pre-opening expenses were 0.2% of total revenues, down 10 bps from the year-ago quarter.

Balance Sheet

As of Apr 3, 2018, cash and cash equivalents amounted to $24.8 million, compared with $68 million as of Jan 2, 2018.

Management announced a cash dividend of 29 cents per share of common stock. The dividend will be payable on May 22, 2018 to stockholders of record at the close of business on May 10, 2018.

During the first quarter of 2018, Cheesecake Factory repurchased approximately 0.7 million shares of its common stock at a cost of $34.9 million.

Second-Quarter 2018 Outlook

For the ongoing quarter, adjusted earnings per share are estimated in the range of 78-82 cents based on an anticipated comps outlook within 0.5-1.5% at Cheesecake Factory restaurants.

2018 Guidance

The company expects earnings in the range of $2.62-$2.74 (down from the previously guided range of $2.64-$2.80). The Zacks Consensus Estimate for fiscal 2018 earnings is pegged at $2.73.

Meanwhile, the company expects comps to grow in the range of 1-2%, up from previously expected comps growth of flat to up 1%.

Capital expenditures for the year are now projected in the range of $80-$90 million, compared with the previously guided range of $90-$105 million.

Additionally, Cheesecake Factory expects to open four restaurants internationally in full-year 2018, including the first location in Beijing that opened in January, and second international licensed location in Riyadh, Saudi Arabia. The company also plans to open four to six company-owned restaurants including one Grand Lux Cafe.

Zacks Rank & Peer Releases

Cheesecake Factory carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Darden DRI reported mixed third-quarter fiscal 2018 results, wherein earnings surpassed the Zacks Consensus Estimate while revenues lagged the same. Adjusted earnings of $1.71 per share increased 29.5% year over year on the back of higher revenues. 

Restaurant Brands’ QSR first-quarter 2018 earnings and revenues surpassed the Zacks Consensus Estimate. Earnings under the previous accounting standard came in at 67 cents, growing 86.1% from the prior-year quarter.

Upcoming Peer Release

McDonald's MCD, carrying a Zacks Rank #3, is scheduled to report first-quarter 2018 results on Apr 30, before the opening bell.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.

Click here for the 6 trades >>

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
McDonald's Corporation (MCD) : Free Stock Analysis Report
Darden Restaurants, Inc. (DRI) : Free Stock Analysis Report
Restaurant Brands International Inc. (QSR) : Free Stock Analysis Report
To read this article on Zacks.com click here.