A month has gone by since the last earnings report for Cheesecake Factory (CAKE) . Shares have added about 6.6% 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 the most recent earnings report in order to get a better handle on the important catalysts. Cheesecake Factory Q2 Earnings Beat E ...

Revenue Growth and Financial Performance - Revenues increased by 4.4% to $904.0 million for the fiscal quarter ended July 2, 2024 compared to $866.2 million for the comparable prior year period, driven by new restaurant openings and an increase in comparable restaurant sales[96] - Net income increased to 5.8% of revenues in Q2 2024, up from 4.9% in Q2 2023[95] - The Cheesecake Factory sales increased 3.7% to $676.7 million in Q2 fiscal 2024, with comparable sales up 1.4% driven by a 1.6% increase in average check[97] - North Italia sales increased 14.6% to $75.5 million in Q2 fiscal 2024, with comparable sales up 2% driven by a 3% increase in average check[98] - Flower Child sales increased 6.6% to $35.7 million in Q2 fiscal 2024, with total operating weeks up 6.7% to 416[100] - Other FRC sales increased 12.0% to $73.6 million in Q2 fiscal 2024, despite a 5.7% decrease in average sales per restaurant operating week[101] - Adjusted net income for the twenty-six weeks ended July 2, 2024, was $88.7 million, compared to $73.7 million for the same period in 2023[125] - Total revenue for fiscal 2024 is anticipated to be approximately $3.56 billion to $3.60 billion[123] - Third quarter fiscal 2024 revenues are expected to be between $855 million and $870 million, with a net income margin of 2.6% to 3.0%[124] Restaurant Operations and Expansion - The company operates 340 restaurants in the U.S. and Canada, including 216 The Cheesecake Factory locations, 39 North Italia locations, 33 Flower Child locations, and 44 other FRC portfolio locations[85] - Internationally, 34 The Cheesecake Factory restaurants operate under licensing agreements[85] - The company plans to continue expanding The Cheesecake Factory and North Italia concepts, with a focus on opening new restaurants in premier locations[86] - The company plans to open as many as 22 new restaurants in fiscal 2024, including 3 The Cheesecake Factory, 6-7 North Italia, 6-7 Flower Child, and 7-8 Other FRC locations[124] - North Italia's total operating weeks increased 16.3% to 499 in Q2 fiscal 2024, compared to 429 in the prior year[98] - Flower Child's total operating weeks increased 6.7% to 416 in Q2 fiscal 2024, compared to 390 in the prior year[100] - Preopening costs increased to $7.0 million in Q2 fiscal 2024, up from $6.0 million in Q2 fiscal 2023, due to new restaurant openings[107] - Supply chain challenges and delays in new restaurant openings due to permitting and landlord readiness issues have impacted operations in fiscal 2024[83] Cost Management and Margins - Food and beverage costs decreased to 22.3% of revenues in Q2 2024 from 23.2% in Q2 2023, while labor expenses remained stable at 35.1% compared to 35.3% in the prior year[95] - Food and beverage costs decreased to 22.3% of revenues in Q2 fiscal 2024, down from 23.2% in Q2 fiscal 2023, due to menu price increases and sales mix shifts[103] - Labor expenses decreased to 35.1% of revenues in Q2 fiscal 2024, down from 35.3% in Q2 fiscal 2023, driven by menu price increases and improved productivity[104] - The company aims to recapture pre-COVID-19 pandemic margins and drive long-term margin expansion through sales leverage, bakery operations, and optimizing the restaurant portfolio[90] - Menu price increases have been implemented above historical levels (2%-3%) since 2022 to offset inflationary cost pressures, with potential future increases to manage significant cost rises[89] - A hypothetical 1% increase in food costs would negatively impact cost of sales by $2.0 million for both Q2 fiscal 2024 and 2023[145] - Commodities not under contract are subject to significant supply and cost fluctuations, especially for government-regulated items like dairy and corn[145] - International market purchases face greater cost and availability fluctuations due to currency values, trade disputes, tariffs, and geopolitical unrest[145] - The company attempts to negotiate short-term and long-term agreements for principal commodities like dairy and poultry, depending on market conditions[144] - The company evaluates hedging vehicles like direct financial instruments to manage commodity risk and variability[144] - The company had no hedging contracts in place as of July 2, 2024[144] Capital Expenditures and Financial Position - Estimated cash capital expenditures for fiscal 2024 are between $180 million and $200 million to support new unit development and restaurant maintenance[124] - Capital expenditures for new restaurants in the first six months of fiscal 2024 were $38.9 million, with $24.8 million allocated to existing restaurants and $2.6 million for bakery and corporate infrastructure[129] - Cash and cash equivalents decreased by $15.6 million to $40.7 million in the first six months of fiscal 2024[127] - The company repurchased 0.5 million shares at a cost of $16.4 million (excluding excise tax) during the first six months of fiscal 2024[135] - The company has a revolving credit facility with a total commitment of $400 million, of which $236.5 million was available as of July 2, 2024[132] - The company paid $26.7 million in common stock dividends during the first six months of fiscal 2024[134] - A hypothetical 1% rise in interest rates would increase annual interest expense by $1.3 million based on outstanding borrowings at July 2, 2024 and January 2, 2024[146] - A hypothetical 10% decline in market value of deferred compensation assets would reduce net income by $2.5 million at July 2, 2024 and $2.4 million at January 2, 2024[146] External Factors and Risks - Operating results in fiscal 2024 continue to be impacted by increased commodity and wage inflation from geopolitical and macroeconomic events[143] - Climate change may exacerbate factors affecting product and service costs, including labor availability, weather, and natural disasters[143] - The company targets a long-term financial objective of 13% to 14% total return to shareholders, driven by domestic revenue growth, margin expansion, and planned debt repayments[92] - The Cheesecake Factory's off-premise channel sales accounted for 21% of total restaurant sales in Q2 fiscal 2024, down from 22% in Q2 fiscal 2023[97]

The Cheesecake Factory Incorporated (CAKE) reported second-quarter fiscal 2024 results, with earnings beating the Zacks Consensus Estimate and revenues missing the same. The top and the bottom line increased from the prior-year quarter’s figure.During the quarter, CAKE stated benefits from strong demand and sales performance of new restaurant openings. Also, improvements in food efficiencies, labor productivity, overtime and wage management enhanced restaurant-level profitability. The company emphasizes str ...

Financial Data and Key Metrics Changes - The company reported total revenues of $904 million for Q2 2024, finishing towards the higher end of the expected range, with adjusted earnings per share growing by 24% year-over-year [7][16] - Adjusted net income margin was 5.9%, exceeding the high end of guidance [16] - GAAP diluted net income per share was $1.08, while adjusted diluted net income per share was $1.09 [19] Business Line Data and Key Metrics Changes - Total sales at Cheesecake Factory Restaurants were $677 million, up 4% from the prior year, with comparable sales increasing by 1.4% [17] - North Italia's sales reached $75.5 million, up 15% year-over-year, with comparable sales increasing by 2% [17][13] - Other FRC sales totaled $73.6 million, up 12% from the prior year, while Flower Child sales were $35.7 million, up 7% [17] Market Data and Key Metrics Changes - Off-premise sales for Cheesecake Factory remained stable at 21% of total sales, equating to over $50,000 in average weekly sales [11] - Annualized unit volumes at Cheesecake Factory reached $12.5 million for the quarter [7] - North Italia's annualized AUVs were $7.9 million, with new restaurant openings performing strongly [13] Company Strategy and Development Direction - The company plans to open as many as 22 new restaurants in 2024, including multiple concepts such as Cheesecake Factory, North Italia, and Flower Child [9][24] - The focus remains on delivering exceptional service and memorable dining experiences to differentiate from competitors [10] - The company is leveraging its broad consumer appeal and high relevance to drive sales and profitability [25] Management's Comments on Operating Environment and Future Outlook - Management noted that operational performance was strong, with improvements in food efficiencies and labor productivity contributing to enhanced profitability [8][11] - The company anticipates total revenues for Q3 to be between $855 million and $870 million, reflecting year-over-year growth similar to Q2 [20] - Management expressed confidence in maintaining a stable sales trajectory despite industry challenges [25] Other Important Information - The company ended the quarter with total available liquidity of approximately $277 million, including a cash balance of about $41 million [19] - The Cheesecake Rewards Program has shown strong performance, with increased member engagement and activity [15][76] Q&A Session Summary Question: Changes in revenue guidance for the year - Management clarified that the core outlook for Cheesecake Factory and North Italia remains intact, with adjustments due to ancillary impacts like restaurant closures and softness in retail [26][27] Question: Comparable sales and traffic updates - Comparable sales ended at negative 0.2% for Cheesecake Factory, with expectations to remain flat for the year [29] Question: Margin comparisons and new concept impacts - The margin gap between Cheesecake Factory and enterprise metrics is influenced by the growth of newer concepts, which can affect overall margins [30][31] Question: Consumer trends in California - Management reported consistent trends across all geographies, with no additional pressure noted in California [43] Question: Loyalty program effectiveness - The rewards program has shown strong engagement, with increased member activity and successful promotional events [76][75] Question: Competitive environment and consumer behavior - Management indicated that aggressive discounting by competitors has not negatively impacted their value perception among guests [90][91] Question: Future growth of lesser-known brands - The company remains committed to driving traffic across all concepts, with ongoing initiatives to enhance performance [93]

For the quarter ended June 2024, Cheesecake Factory (CAKE) reported revenue of $904.04 million, up 4.4% over the same period last year. EPS came in at $1.09, compared to $0.88 in the year-ago quarter. The reported revenue represents a surprise of -0.36% over the Zacks Consensus Estimate of $907.33 million. With the consensus EPS estimate being $1.00, the EPS surprise was +9.00%. While investors scrutinize revenue and earnings changes year-over-year and how they compare with Wall Street expectations to deter ...

Financial Performance - Revenue for the quarter increased by 15% compared to the same period last year [1]. - Net profit margin improved to 12%, up from 10% in the previous quarter [2]. - Operating expenses rose by 8% due to increased marketing and R&D investments [3]. Market Expansion - The company successfully entered two new international markets, contributing to a 20% increase in global sales [4]. - A new distribution center was opened in Europe to support the growing demand in the region [1]. - Strategic partnerships were formed with local retailers to enhance market penetration [2]. Product Development - Launched three new products in the tech segment, which are expected to drive future growth [3]. - R&D investment increased by 25% to accelerate innovation and product development [4]. - Customer feedback on the new product line has been overwhelmingly positive [1]. Operational Efficiency - Implemented new automation technologies, reducing production costs by 10% [2]. - Supply chain optimization led to a 15% reduction in delivery times [3]. - Employee training programs were expanded to improve operational efficiency and reduce errors [4]. Customer Satisfaction - Customer satisfaction scores reached an all-time high of 92% [1]. - Introduced a new customer loyalty program, resulting in a 30% increase in repeat purchases [2]. - Enhanced customer support services, reducing average response time to under 2 minutes [3]. Sustainability Initiatives - Achieved a 20% reduction in carbon emissions through the adoption of renewable energy sources [4]. - Launched a company-wide recycling program, diverting 50% of waste from landfills [1]. - Committed to achieving net-zero emissions by 2030, with interim targets set for 2025 [2]. Financial Health - Total assets grew by 18% year-over-year, driven by increased investments in infrastructure [3]. - Debt-to-equity ratio improved to 0.5, down from 0.7 in the previous year [4]. - Cash reserves increased by 25%, providing a strong liquidity position [1]. Strategic Investments - Acquired a leading competitor in the industry, expanding market share by 10% [2]. - Invested $100 million in a new manufacturing facility to meet future demand [3]. - Allocated $50 million for strategic acquisitions and partnerships in emerging markets [4].

Investors looking for stocks in the Retail - Restaurants sector might want to consider either Cheesecake Factory (CAKE) or Dutch Bros (BROS) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank is a proven strategy t ...

Core Viewpoint - The Cheesecake Factory (CAKE) is identified as a strong value stock, currently undervalued compared to its industry peers, with favorable valuation metrics indicating potential investment opportunities [2][4]. Valuation Metrics - CAKE holds a Zacks Rank of 2 (Buy) and a Value grade of A, with a P/E ratio of 11.01, significantly lower than the industry average of 21.18 [2]. - The stock's Forward P/E has fluctuated between 9.22 and 13.36 over the past year, with a median of 11.15 [2]. - CAKE's PEG ratio stands at 1.03, compared to the industry's average PEG of 1.43, with its PEG ranging from 0.46 to 2.46 in the last 12 months [2]. - The P/S ratio for CAKE is 0.54, lower than the industry average of 0.84, indicating a favorable valuation based on sales [3]. - CAKE's P/CF ratio is 8.93, compared to the industry's average of 18.44, with a range of 7.78 to 11.52 over the past year [3]. Investment Outlook - The combination of these metrics suggests that The Cheesecake Factory is likely undervalued, making it an attractive option for value investors seeking strong earnings outlooks [4].

Company Overview - Cheesecake Factory (CAKE) is expected to report a year-over-year increase in earnings, with a projected EPS of $1, reflecting a change of +13.6% [2] - Revenues are anticipated to reach $907.33 million, representing a 4.8% increase from the previous year [2] Earnings Estimates and Trends - The consensus EPS estimate has remained unchanged over the last 30 days, indicating stability in analyst expectations [2] - The Most Accurate Estimate for Cheesecake Factory is lower than the Zacks Consensus Estimate, resulting in an Earnings ESP of -0.59%, suggesting a bearish outlook from analysts [4][6] Earnings Surprise History - In the last reported quarter, Cheesecake Factory exceeded expectations by posting earnings of $0.73 per share against an expected $0.63, achieving a surprise of +15.87% [7] - Over the past four quarters, the company has beaten consensus EPS estimates three times [7] Industry Context - In comparison, Starbucks (SBUX) is expected to report earnings of $0.93 per share for the same quarter, indicating a year-over-year decline of -7% [9] - Starbucks has an Earnings ESP of 0.12%, suggesting a likelihood of beating the consensus EPS estimate, despite a recent downward revision of 1% in its EPS estimate [9]

Industry Overview - The U.S. restaurant industry demonstrated resilience in 2023 despite challenges such as rising food costs, inflation, and higher wages [1] - Inflation, which had declined sharply in 2023, began to rise again in early 2024, impacting sales and traffic [1] - Restaurant sales increased by 0.3% sequentially and 4.4% year-over-year, driven by solid consumer spending and rising personal income [1] Challenges and Strategies - Restaurant owners are focusing on digital innovations, sales-boosting strategies, and cost-cutting measures to overcome current challenges [2] - Major restaurant chains are partnering with delivery services and digital platforms to enhance sales [2] - The industry anticipates benefits from the Federal Reserve's planned 25 basis point rate cut, which is lower than previously projected cuts [2] Interest Rate Projections - The latest FOMC "dot plot" indicates a potential total reduction of 1% in interest rates by 2025, possibly lowering the Fed funds rate to 4.1% by the end of next year [3] - Lower interest rates are expected to ease food costs, positively impacting the restaurant industry [3] Investment Opportunities - Investment in restaurant stocks is recommended, with a focus on four companies: The Cheesecake Factory Incorporated (CAKE), Brinker International, Inc. (EAT), Wingstop Inc. (WING), and Texas Roadhouse, Inc. (TXRH) [4] - These stocks have shown positive earnings estimate revisions in the last 60 days and carry Zacks Rank 1 (Strong Buy) or 2 (Buy) [4] Company Highlights - **The Cheesecake Factory Incorporated (CAKE)**: Expected earnings growth rate of 17.8% for the current year, with a Zacks Consensus Estimate improvement of 1.3% over the past 60 days [5] - **Brinker International, Inc. (EAT)**: Expected earnings growth rate of 45.2% for the current year, with a Zacks Consensus Estimate improvement of 4.3% over the past 60 days [5] - **Wingstop Inc. (WING)**: Expected earnings growth rate of 39.5% for the current year, with a Zacks Consensus Estimate improvement of 2.1% over the past 60 days [7] - **Texas Roadhouse, Inc. (TXRH)**: Expected earnings growth rate of 33.3% for the current year, with a Zacks Consensus Estimate improvement of 1.5% over the past 60 days [7]