It has been about a month since the last earnings report for Cheesecake Factory (CAKE). Shares have lost about 6.9% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is 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 drivers.
Cheesecake Factory Q4 Earnings Lag Estimates, Rise Y/Y
The Cheesecake Factory reported fourth-quarter fiscal 2021 results, wherein earnings and revenues missed the Zacks Consensus Estimate for the second straight quarter. However, the top and the bottom lines improved on a year-over-year basis.
Earnings & Revenue Discussion
In the quarter under review, adjusted earnings per share (EPS) was 49 cents, which missed the Zacks Consensus Estimate of 59 cents. In the prior-year quarter, the company had reported an adjusted loss of 32 cents per share.
During the fiscal fourth quarter, total revenues of $776.7 million lagged the Zacks Consensus Estimate of $778 million. The top line surged 40.1% on a year-over-year basis. The upside can primarily be attributed to solid off-premise sales growth.
During the reported quarter, comps at Cheesecake Factory restaurants increased 33.8% year over year. In the prior-year quarter, comps had fallen 19.5% year over year. However, the metric is up 7.7% compared with 2019 levels.
Costs in Detail
Cost of sales, as a percentage of revenues, increased 10 basis points (bps) year over year to 23% in the fiscal fourth quarter. Labor expenses, as a percentage of total revenues, were 37.1%, down 210 bps from the year-ago quarter’s levels. Other operating costs (as a percentage of total revenues) came in at 27%, down 320 bps from the prior-year quarter’s level.
General and administrative (G&A) expenses accounted for 6.1% of revenues compared with 7.3% in the prior-year quarter. In the fiscal fourth quarter, pre-opening expenses accounted for 0.5% of revenues, flat year over year.
Balance Sheet
As of Dec 28, 2021, Cheesecake Factory’s cash and cash equivalents totaled $189.6 million compared with $154.1 million as of Dec 29, 2020. During the fiscal fourth quarter, long-term debt (net of issuance costs) was $466 million compared with $280 million as of Dec 29, 2020.
Developmental Details
During the fiscal fourth quarter, the company opened four new restaurants, including The Cheesecake Factory in Huntsville, AL, North Italia in Orlando and a Blanco and a Culinary Dropout in Denver. During the quarter, the company achieved its development objective of opening 14 new restaurants (across its concepts) in fiscal 2021.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -13.77% due to these changes.
VGM Scores
At this time, Cheesecake Factory has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. 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.
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The Cheesecake Factory Incorporated (CAKE): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
