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Category: Stock Market and Electronic Arts
Date: 30 October 2019 Stock Price: $43.90 We take a look at the 3rd quarter earnings report of their 2019 fiscal year of The Cheesecake Factory a leader in experimental dining with 289 restaurants open across the United States and Canada trading under their various brands.
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About The Cheesecake Factory
The Cheesecake Factory Incorporated is a leader in experiential dining. We are culinary forward and relentlessly focused on hospitality. Delicious, memorable experiences created by passionate people – this defines who we are and where we are going. We currently own and operate 289 restaurants throughout the United States and Canada under brands including The Cheesecake Factory®, North Italia® and a collection within the Fox Restaurant Concepts subsidiary. Internationally, 24 The Cheesecake Factory® restaurants operate under licensing agreements. Our bakery division operates two facilities that produce quality cheesecakes and other baked products for our restaurants, international licensees and third-party bakery customers. In 2019, we were named to the FORTUNE Magazine “100 Best Companies to Work For®” list for the sixth consecutive year
Overview of The Cheesecake Factory 3rd quarter 2019 earnings report
Data below refers to quarterly data unless specified otherwise:
- Net Revenues: $586.536 million (up from $575.160 million for the same period of the previous year)
- Net revenues increased by 1.9% over the last 12 months
- Total cost and expenses: $559.572 million (down from $541.665 million for the same quarter of the previous year)
- Total cost and expenses increased by 3.3% over the last 12 months
- Net income: $16.090 million (down from $28.475 million from for the same period of the previous year)
- Diluted earnings per share: $0.36 (down from $0.61 for the same period of the previous year)
- PE ratio of Cheesecake Factory: 30.4
- Diluted weighted-average shares outstanding: 44.186 million (down from 46.368 million for the same period of the previous year)
- Cash and cash equivalents $306.252 million
- Cash and cash equivalents per share: $6.93
- Cash and cash equivalents makes up 15.8% of The Cheesecake Factory's market capital
- Cash and cash equivalents makes up 12.85% of Electronic Arts' total assets
- Stockholders equity in The Cheesecake Factory : $533.816 million
- Stockholders equity per share: $12.08
- The Cheesecake Factory is trading at 3.63 times its stockholders equity which is within the expected range of between 2 and 4 that most firms tend to trade at.
The Cheesecake Factory's management commentary on their 3rd quarter 2019 results
CALABASAS HILLS, Calif.--(BUSINESS WIRE)-- The Cheesecake Factory Incorporated (NASDAQ: CAKE) today reported financial results for the third quarter of fiscal 2019, which ended on October 1, 2019.
Total revenues were $586.5 million in the third quarter of fiscal 2019 compared to $575.2 million in the third quarter of fiscal 2018. Net income and diluted net income per share were $16.1 million and $0.36, respectively, in the third quarter of fiscal 2019. “We continued to outperform the industry during the third quarter and generated both comparable sales at The Cheesecake Factory and operating performance within our expectations,” said David Overton, Chairman and Chief Executive Officer. “Our operators again managed their restaurants well despite the softer industry sales environment.”
Overton continued, “Earlier this month, we completed the acquisitions of North Italia and Fox Restaurant Concepts, reinforcing our leadership position in experiential dining. The integration of North Italia is on track. We recently renegotiated and extended our exclusive DoorDash delivery agreement, which now also covers North Italia and the FRC concepts, underscoring the benefit of our scale for these brands. For the balance of the year, we are focused on driving performance at The Cheesecake Factory restaurants and our acquired businesses, while continuing to execute a smooth integration. With the strength of The Cheesecake Factory brand, coupled with accelerated and diversified growth drivers in North Italia and the FRC concepts, we believe we are well-positioned for 2020 and the long-term.”
Subsequent Event
On October 2, 2019, the Company completed the acquisitions of North Italia and Fox Restaurant Concepts (FRC).
Development
The Company continues to expect to open five Cheesecake Factory restaurants in fiscal 2019, including the Gainesville, Florida location that opened during the third quarter. The Company expects to open three additional locations during the fourth quarter of fiscal 2019.
During the fourth quarter of fiscal 2019, the Company expects to open one North Italia restaurant.
Subsequent to quarter-end, a Flower Child location in McLean, Virginia opened and one additional Flower Child restaurant is expected to open later in the fourth quarter of fiscal 2019, within the FRC subsidiary.
During fiscal 2019, the Company now expects as many as six Cheesecake Factory restaurants to open internationally under licensing agreements. This includes the second location in Abu Dhabi, which opened during the third quarter and the first location in Macao, which recently opened during the fourth quarter. The Company expects two additional licensed locations to open during the fourth quarter of fiscal 2019.
Capital Allocation
The Company’s Board of Directors declared a quarterly cash dividend of $0.36 per share of the Company’s common stock. The dividend is payable on November 26, 2019 to shareholders of record at the close of business on November 12, 2019. During the third quarter of fiscal 2019, the Company repurchased approximately 263,000 shares of its common stock at an aggregate cost of $11.4 million. The Company closed on an upsized $400 million revolving credit facility and had $335 million drawn at the end of the third quarter of fiscal 2019, including $285 million to support the funding of the North Italia and FRC acquisitions.
Total revenues were $586.5 million in the third quarter of fiscal 2019 compared to $575.2 million in the third quarter of fiscal 2018. Net income and diluted net income per share were $16.1 million and $0.36, respectively, in the third quarter of fiscal 2019. “We continued to outperform the industry during the third quarter and generated both comparable sales at The Cheesecake Factory and operating performance within our expectations,” said David Overton, Chairman and Chief Executive Officer. “Our operators again managed their restaurants well despite the softer industry sales environment.”
Overton continued, “Earlier this month, we completed the acquisitions of North Italia and Fox Restaurant Concepts, reinforcing our leadership position in experiential dining. The integration of North Italia is on track. We recently renegotiated and extended our exclusive DoorDash delivery agreement, which now also covers North Italia and the FRC concepts, underscoring the benefit of our scale for these brands. For the balance of the year, we are focused on driving performance at The Cheesecake Factory restaurants and our acquired businesses, while continuing to execute a smooth integration. With the strength of The Cheesecake Factory brand, coupled with accelerated and diversified growth drivers in North Italia and the FRC concepts, we believe we are well-positioned for 2020 and the long-term.”
Subsequent Event
On October 2, 2019, the Company completed the acquisitions of North Italia and Fox Restaurant Concepts (FRC).
Development
The Company continues to expect to open five Cheesecake Factory restaurants in fiscal 2019, including the Gainesville, Florida location that opened during the third quarter. The Company expects to open three additional locations during the fourth quarter of fiscal 2019.
During the fourth quarter of fiscal 2019, the Company expects to open one North Italia restaurant.
Subsequent to quarter-end, a Flower Child location in McLean, Virginia opened and one additional Flower Child restaurant is expected to open later in the fourth quarter of fiscal 2019, within the FRC subsidiary.
During fiscal 2019, the Company now expects as many as six Cheesecake Factory restaurants to open internationally under licensing agreements. This includes the second location in Abu Dhabi, which opened during the third quarter and the first location in Macao, which recently opened during the fourth quarter. The Company expects two additional licensed locations to open during the fourth quarter of fiscal 2019.
Capital Allocation
The Company’s Board of Directors declared a quarterly cash dividend of $0.36 per share of the Company’s common stock. The dividend is payable on November 26, 2019 to shareholders of record at the close of business on November 12, 2019. During the third quarter of fiscal 2019, the Company repurchased approximately 263,000 shares of its common stock at an aggregate cost of $11.4 million. The Company closed on an upsized $400 million revolving credit facility and had $335 million drawn at the end of the third quarter of fiscal 2019, including $285 million to support the funding of the North Italia and FRC acquisitions.
The Cheesecake Factory (NASDAQ: CAKE) stock price history
The image below, obtained from Google, shows the stock price history of Cheesecake Factory over the last 5 years. And its not been a very good time for Cheesecake Factory stockholders. 5 years ago the stock was trading at around $46 a stock and its currently trading at $43.90 a stock. That's a loss of -4.5% suffered by Cheesecake Factory stockholders over the last 5 years. The opportunity cost of holding Cheesecake Factory stock instead of say Netflix that returned over 300% over a 5 year period is significant though.
The stock of Cheesecake Factory is trading at close to the midpoint between its 52 week high and 52 week low which to us is an indication that the short term sentiment and momentum of Cheesecake Factory's stock is neutral at this point in time.
The stock of Cheesecake Factory is trading at close to the midpoint between its 52 week high and 52 week low which to us is an indication that the short term sentiment and momentum of Cheesecake Factory's stock is neutral at this point in time.
Recent coverage of The Cheesecake Factory
The extract below discusses the latest news regarding The Cheesecake Factory as obtained from TheStreet.com
The Cheesecake Factory Incorporated (NASDAQ: CAKE) today reported financial results for the third quarter of fiscal 2019, which ended on October 1, 2019. Total revenues were $586.5 million in the third quarter of fiscal 2019 compared to $575.2 million in the third quarter of fiscal 2018. Net income and diluted net income per share were $16.1 million and $0.36, respectively, in the third quarter of fiscal 2019. Excluding the after-tax impact of the $7.7 million loss on the Company's minority investments and $2.4 million in acquisition-related costs, net income and diluted net income per share for the third quarter of fiscal 2019 would have been $26.1 million and $0.59, respectively. Please see the Company's reconciliation of non-GAAP financial measures at the end of this release. Comparable restaurant sales at The Cheesecake Factory restaurants increased 0.4% in the third quarter of fiscal 2019. "We continued to outperform the industry during the third quarter and generated both comparable sales at The Cheesecake Factory and operating performance within our expectations," said David Overton, Chairman and Chief Executive Officer.
The Cheesecake Factory Incorporated (NASDAQ: CAKE) today reported financial results for the third quarter of fiscal 2019, which ended on October 1, 2019. Total revenues were $586.5 million in the third quarter of fiscal 2019 compared to $575.2 million in the third quarter of fiscal 2018. Net income and diluted net income per share were $16.1 million and $0.36, respectively, in the third quarter of fiscal 2019. Excluding the after-tax impact of the $7.7 million loss on the Company's minority investments and $2.4 million in acquisition-related costs, net income and diluted net income per share for the third quarter of fiscal 2019 would have been $26.1 million and $0.59, respectively. Please see the Company's reconciliation of non-GAAP financial measures at the end of this release. Comparable restaurant sales at The Cheesecake Factory restaurants increased 0.4% in the third quarter of fiscal 2019. "We continued to outperform the industry during the third quarter and generated both comparable sales at The Cheesecake Factory and operating performance within our expectations," said David Overton, Chairman and Chief Executive Officer.
The Cheesecake Factory (NASDAQ: CAKE) latest stock valuation
So what is Cheesecake Factory stock worth based on the release of their latest earnings report and their guidance provided? Based on Cheesecake Factory latest earnings report and their guidance provided our valuation models provide a target (full value) price for the stock of Cheesecake Factory at $38.20 a stock and therefore believe the stock of Cheesecake Factory is overvalued
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $38.20. Therefore we believe a good entry point into Cheesecake Factory stock is at $34.40 or below. We expect the stock of Cheesecake Factory s to pull back from current levels to levels closer to our target price (full value price) in coming weeks and moths as we believe it is overvalued at this point in time.
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $38.20. Therefore we believe a good entry point into Cheesecake Factory stock is at $34.40 or below. We expect the stock of Cheesecake Factory s to pull back from current levels to levels closer to our target price (full value price) in coming weeks and moths as we believe it is overvalued at this point in time.
Next earnings release date for The Cheesecake Factory
It is expected that The Cheesecake Factory will release 4th quarter and full year results of their 2019 fiscal year in late January 2020 to early February 2020