Cheesecake Stays Neutral - Analyst Blog
April 05 2013 - 12:50PM
Zacks
We maintain our Neutral recommendation on restaurants chain
The Cheesecake Factory Inc. (CAKE). While we
prefer the company’s efforts to expand beyond US, its relatively
favorable food cost outlook and solid return to shareholders, a
sluggish performance in fourth-quarter 2012 keeps us on the
sidelines at the current level.
Why the Reiteration?
Cheesecake, which operates three brands namely The Cheesecake
Factory Restaurant, Grand Lux Café and RockSugar Pan Asian, is well
positioned to sustain its same-stores sales growth driven by
improved guest traffic. Management expects 2013 to be strong,
marking the fourth year of consistent increases in comparable
restaurant sales. The company is also on its way to attain
historically high margin levels in 2013.
Cheesecake also remains steadfast in its goal to expand beyond the
U.S. It opened 3 restaurants in the Middle East under a license
agreement in 2012. Two more units abroad are in the offing for the
company in 2013. The company is all set to foray into Mexico,
Chile and four other Latin American countries namely Argentina,
Brazil, Colombia and Peru by 2021. Management expects solid return
from international growth as evident from the higher-than-expected
volume growth at the three Middle East units.
However, the company performed sluggishly in the fourth quarter of
2012 with both earnings and revenues declining year-over-year and
missing the Zacks Consensus Estimate. Same-store sales growth was
muted in the quarter. Operating margin in the fourth quarter shrank
190 basis points (bps) mainly due to reduced revenues overshadowing
the benign cost structure.
Management is not very hopeful even on comparable store sales
growth in the upcoming first quarter due to the temporary shutdown
of the restaurant in Hawaii owing to a fire and the adverse impact
of the storm that hit the Northeast in early February this
year.
Hence, at the current level, we remain cautious and prefer to take
a wait and see approach till the additional locations scheduled to
open in 2013 and international expansion begin to contribute nicely
to 2013 margins.
Other Stocks to Consider
Some other restaurant industry stocks with a favorable Zacks Rank
include Red Robin Gourmet Burgers Inc. (RRGB),
Burger King Worldwide Inc. (BKW) and
Cracker Barrel Old Country Store Inc. (CBRL).
While Red Robin and Cracker Barrel retain a Zacks Rank #1 (Strong
Buy), Burger King carries a Zacks Rank #2 (Buy).
BURGER KING WWD (BKW): Free Stock Analysis Report
CHEESECAKE FACT (CAKE): Free Stock Analysis Report
CRACKER BARREL (CBRL): Free Stock Analysis Report
RED ROBIN GOURM (RRGB): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
Red Robin Gourmet Burgers (NASDAQ:RRGB)
Historical Stock Chart
From Jun 2024 to Jul 2024
Red Robin Gourmet Burgers (NASDAQ:RRGB)
Historical Stock Chart
From Jul 2023 to Jul 2024