Cheesecake Factory, Inc. (CAKE: 28.81 0.00 0.00%) recently jumped to within striking distance of its multi-year high after reporting solid Q3 results that included a 9% earnings surprise. With estimates on the rise and a bullish growth projection, this Zacks #1 rank stock is a VIP member of the momentum club.
Company Description
The Cheesecake Factory, Inc. owns and operates more than 165 upscale, full-service restaurants in the United States. The company was founded in 1972 and has a market cap of $1.7 billion.
The stronger global economy of the last 12 months has helped retailers and restaurants alike as consumer regain the confidence so spend discretionary income. That dynamic lifted CAKE to solid third-quarter results on October 21 that came in ahead of expectations.
Third-Quarter Results
Sales for the period were up 4.5% from last year to $418 million. Earnings also came in strong at 37 cents, 9% ahead of the Zacks Consensus Estimate, where the company has an average earnings surprise of 13% over the past four quarters.
Same-store sales at the company's flagship restaurant Cheesecake Factory were up 2.8%.
Margins looked solid too, with operating margin up 70bps from last year to 7.5%.
Strong Balance Sheet
The company also gave its balance sheet a nice boost, reducing its debt by $60 million from the beginning of the year to $40 million, dropping its interest expense in the quarter to $1.8 million from $5.8 million.
Buying Shares Back
The Cheesecake Factory was also busy buying its stock, repurchasing 911,724 shares over the quarter for $21.2 million, where the company has now bought back over 2 million shares on the year for $51 million.
Estimates
We saw some decent movement in estimates off the good quarter, with the current year adding 4 cents to $1.42 and the next-year estimate adding 6 cents to $1.66, a bullish 17% growth projection.
Valuation
In light of recent gains, the valuation picture is running a little hot, with a forward P/E of 21X against its peer average of 17X.
2-Year Chart
On the chart, shares jumped higher on the good quarter to move within striking distance of the multi-year high at $30.75. The MACD below the chart is bullish too, with the short-term average trending ahead of the long-term average. Look for support from the trend line and short-term low on any weakness, take a look below.
Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the new Zacks Momentum Trader Service.
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