Cheesecake Factory (CAKE) Q4 Earnings in Line With Estimates

The Cheesecake Factory Inc.’s CAKE fourth-quarter 2017 earnings met analysts’ expectations, while revenues surpassed the same. A challenging operating environment in the U.S. restaurants space has been affecting the company’s performance.

The company’s shares inched up 0.9% in the after-hours trading following the earnings release on Feb 21. Meanwhile, Cheesecake Factory’s shares have returned 11.9% in the past six months outperforming the industry’s rally of 2.1%.

Earnings and Revenue Discussion

Adjusted earnings of 53 cents per share were in line with the Zacks Consensus Estimate. However, earnings declined 20.9% year over year.

Sales of $571.8 million surpassed the Zacks Consensus Estimate of $566.6 million by 0.9% but fell 5.2% year over year.

Inside the Headlines

Comps at Cheesecake Factory restaurants declined 0.9%, whereas the year-ago quarter marked a 1.1% growth in comps and the preceding quarter marked a 2.3% decline. Pricing was up 2.5%, traffic was down 2.8% and mix was a negative 0.4%.

Cost of sales ratio increased 20 basis points (bps) year over year to 23.4%. Meanwhile, labor expense ratio was 34.5%, up 90 bps year over year. This was primarily driven by higher hourly wage rates and some deleverage.

General and administrative expenses accounted for 6.1% of revenues in fourth-quarter fiscal 2017, up 80 bps from the prior-year quarter. The upside can be attributed to lower bonus accrual and lower stock-based compensation expense, partially offset by higher legal costs. Notably, pre-opening expenses were roughly $7.6 million, up from $7 million in the year-ago quarter.

The Cheesecake Factory Incorporated Price, Consensus and EPS Surprise

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

Fiscal 2017 Highlights

Sales of $2.26 billion deteriorated 0.5% year over year. Adjusted earnings of $2.60 per share declined 8.1% year over year.

Balance Sheet

As of Jan 2, 2018, cash and cash equivalents amounted to $6 million, compared with $53.8 million as of Jan 3, 2017.

Management announced a cash dividend of 29 cents per share of common stock. The dividend will be payable on Mar 20, 2018 to the stockholders of record at the close of business on Feb 28, 2018.

During the fourth quarter of fiscal 2017, Cheesecake Factory repurchased approximately 0.4 million shares of its common stock at a cost of $16.6 million. In fiscal 2017, the company repurchased a total of 2.6 million shares of its common stock worth $123.0 million.

First-Quarter Fiscal 2018 Outlook

For the upcoming quarter, adjusted earnings per share are estimated in the range of 66-70 cents based on an anticipated comps outlook in the range of 0.5-1.5% at Cheesecake Factory restaurants.

The company projects corporate tax rate for the first quarter to be approximately 13%.

Fiscal 2018 Guidance

The company expects earnings in the range of $2.64-$2.80. The Zacks Consensus Estimate for fiscal 2018 earnings is pegged at $2.60.

Meanwhile, the company continues to expect comps of flat to up 1%.

Capital expenditures for the year are now projected in the range of $90-$105 million.

Additionally, Cheesecake Factory continues to expect to open four to six company-owned restaurants in fiscal 2018.

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.

Chipotle Mexican Grill CMG posted mixed fourth-quarter 2017 results, with adjusted earnings of $1.34 per share surpassing the consensus estimate of $1.32 by 1.5%. The bottom line also grew 143.6% year over year on lower costs and higher revenues.

McDonald's MCD reported fourth-quarter 2017 adjusted earnings per share (EPS) of $1.71, beating the consensus mark of $1.59 by 7.5%. The bottom line also improved 19% from the year-ago quarter (16% in constant currencies). The upside reflects strong operating performance and G&A savings.

Dunkin' Brands’ DNKN fourth-quarter 2017 adjusted earnings of 64 cents per share topped the Zacks Consensus Estimate of 63 cents. However, earnings remained year over year as a decline in adjusted net income was offset by a fall in shares outstanding.

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